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Friday, Apr 12, 2024

Business Attempts to Cope With Soaring Gas Costs


Businesses in San Diego are grappling with analysts’ predictions of an unheard-of $4 a gallon for gasoline as the grumblings of frustrated employees regarding the high cost of fuel grow louder by the day.

The average price of regular unleaded gasoline last week in San Diego County broke the $3 a gallon mark , double what they were five years ago when the average regular gas price per gallon in Southern California hovered around $1.50, according to the Automobile Club of Southern California. Per sandiegogasprices.com, the lowest and highest regular gas prices in San Diego County as of the middle of last week ranged from $2.71 to $3.34 a gallon.

“Prices are going to go very, very high,” said Charles Langley, a public advocate with the Utility Consumers’ Action Network, a San Diego-based watchdog group. “This is the first salvo in a series of what will be viewed as draconian price hikes over the next couple of years We’ll be saying next year, ‘Do you think we’ll ever see cheap $3 gas again?’ ”

At Custom Logos in Clairemont, about half the company’s 50-person work force commute daily from North and East counties. Employee Alex Campos said there’s a lot of “complaining around the water cooler” about the high price of gas, especially by workers who have families and have opted to drive sports utility vehicles.

“People just can’t afford it,” Campos said. “They just don’t know what to do. It’s very, very frustrating.”

Despite his long-term concern, Langley said he doesn’t think gas prices will rise to the $4 mark as soon as some analysts have predicted, though they might in the next year.

According to Alan Gin, an associate professor of economics at the University of San Diego, rising gas prices have big impacts on a community’s financial health.

“I estimate that for every 10 cents the price a gallon goes up, it takes $7 million a month out of the local economy,” Gin said. “It won’t derail the economy, but we’d rather have the money to spend on other goods. If there is a huge surge, to $3.50 or $4 a gallon, then we’re looking at almost a billion dollars out of San Diego’s economy in a year. People are spending on gas what they could have been spending on retail, entertainment and restaurant meals.”

Using Hurricane As An Excuse

While gas prices traditionally spike in the summer, especially during Labor Day weekend, the current increases are being blamed by some on Hurricane Katrina, which destroyed some oil facilities in the Gulf Coast. But those claims are being disputed by UCAN.

“What we’re seeing now has nothing to do with Katrina, although the industry may well point to it as an excuse,” Langley said, noting that the West Coast gets most of its oil from other sources, such as the Alaska Pipeline. “As far as I know, there has been no hurricane in Alaska.”

However, analysts predicting $4 a gallon cite the demand in Southern states to replace what oil they normally relied on from the Gulf Coast could strain California’s supplies. It’s a point Langley is willing to concede , sort of.

“We will see inventories drawn away from the West Coast,” he said. “California refineries export fuel all the time. The big debate is, are they doing it to create shortages?”

Now that gas has broken the $3 mark, some San Diego businesses are taking the news in stride, while others are fed up.

Independent gas station owner David Hallak called this most recent wave of soaring prices “unreal and crazy.” Hallak, who operates Emerald Oil in La Mesa, said that he’s become accustomed to prices changing 2 to 3 cents daily but never more than $1 in one week, which was the case leading up to Labor Day weekend.

“It’s just not even worth it for me to be open,” Hallak said. “But I have to bite the bullet because I have regular customers counting on me.”

Hallak started Sept. 1 offering regular unleaded gas for $2.99 a gallon at a loss to himself for the sake of staying competitive. If he wanted to break even that day he said he’d have to start selling regular gas for $3.39 a gallon.

At Windy’s Flowers in Clairemont, where deliveries are a big part of the business, owner Jim Martin said he’s had to pass on a $1 increase in delivery fee to his customers in the last 30 days.

“It’s just getting more and more expensive,” Martin said. “But everybody’s in the same boat and the customers understand; they know we’re not gouging them or anything like that.”

Martin said he expects to ride out the wave until prices come down the same way his business has coped with all the setbacks during the last 35 years it’s been in operation.

“We’ve seen it all,” Martin said. “We’ll get through this one, too.”

Meanwhile, some San Diego restaurateurs are on the fence about raising menu prices, said Steve Zolezzi, the executive vice president of the Food & Beverage Association of San Diego.

“There are probably a lot of restaurant operators hoping that spiking gasoline prices are temporary because demand and prices typically go down after Labor Day,” Zolezzi said.

The “wait-and-see” period could end as early as next month if gas prices don’t drop back below $3 a gallon by the end of September, he added.

“I think that even at $3 a gallon, they’ll have to charge higher prices, because gasoline has a broad impact,” Zolezzi said. “It touches everything, including the price of goods and delivery charges.”

But Bernard Guillas, the executive chef of the La Jolla Beach & Tennis Club’s three restaurants, which include the Marine Room, predicted that if gas prices continue to go up, menu prices would likely follow only after restaurants employ some cost-cutting measures such as buying lower priced cuts of meat in order to stay competitive.

“Instead of rack of lamb, you’re likely to see leg of lamb on the menu,” Guillas said. “You’re going to see braised (less expensive cuts of meat) vs. prime cuts, since prime is going to be expensive, and you’re going to see more comfort, classic American food.”

For now, Guillas said restaurants, including his, are looking more closely at how they operate.

“We keep an eye on what goes into the trash,” Guillas said. “It’s about efficiency. If there’s a little piece of carrot that can’t go on a plate, it goes into a stock or soup.”

But consumers beware, from an economist’s viewpoint, Gin said it’s not a reach to think some businesses might implement increases for opportunistic reasons, in the same spirit UCAN members are suggesting that oil companies have done to create the gas problem in the first place.

“There is that possibility,” he said. “It’s not beyond my belief. Some companies are taking advantage of the situation to raise prices.”

In an effort to counter claims that Hurricane Katrina is to blame for San Diego’s soaring gas prices, UCAN has asked the California Energy Commission to launch an investigation into whether disaster profiteering is indeed occurring.

Executive Director Michael Shames, on behalf of the consumer network group, sent a letter to Joe Desmond, the commission’s president, last week. In that letter, Shames says his group is “Particularly concerned that some of the market volatility we are witnessing in the state’s gasoline markets mirrors the market manipulation that California experienced during the 2000-2001 energy crisis.”

“I think there is some prodigious disaster profiteering going on in California,” Shames later told the

San Diego Business Journal.

“If Desmond follows the money, he should find that the wholesale market is not operating properly.”

The commission had no response to the group’s letter as of press time.

Staff writer Connie Lewis contributed to this story.


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