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Friday, Jan 27, 2023

Steep Gas Prices Exerting Wide Strain On Local Companies

For the past few years gasoline prices have spiked in the spring and gone down at the beginning of the summer driving season. But as oil prices continue to break record highs, analysts predict that relief at the pump is further off.

At least one, Charles Langley with Utility Consumers’ Action Network, a local advocacy group, doesn’t expect gas prices to drop until the November presidential election nears.

“First of all, we hope that gas does not breach the $4 level in San Diego, but we think it will shatter that barrier in the next couple weeks,” Langley said.

On April 23, regular unleaded gas, according to the AAA Daily Fuel Gauge Report, averaged $3.91 a gallon, up from $3.89 the day before, $3.65 a month ago and $3.39 on the same day last year.

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Langley also thinks that if prices go back down, politics, not market conditions, will be the reason.

“There will be a concerted effort on the part of the oil industry to stabilize prices going into a major election,” he said, citing the 2006 midterm election when gas prices dropped 90 cents a gallon as a case in point.

“The oil industry understands that no matter how much money they give to politicians, when prices are high consumers get upset,” he said. “They understand that if they want to maintain an oil-friendly government they must lower prices before an election.”

According to University of San Diego economist Alan Gin, “Every 10-cent increase in a gallon of gas takes $7 million a month out of the local economy.” But the caveat would be if motorists changed their behavior by buying more fuel-efficient cars or reduced their driving, he added.

“Inflation is also a result of higher gas prices, and because we don’t produce much (gasoline), a lot of what we consume is trucked in. That eventually translates into higher prices at the retail level,” he said.

Weighing Rate Adjustments

Rebecca Blackwood, co-owner of Crest Offset Printing Co. in National City, said that in the past the company has adjusted its rates upward in accordance with higher paper costs, but has held off additional increases in the face of higher fuel costs.

That was before receiving a recent statement billing her for nearly twice the amount from the prior month for gas charges to fuel a van and two cars used for pickups and deliveries.

“Granted, we’re busier so that’s part of it, but a big chunk was the increase in gas prices,” she said.

How much the company will raise its prices is uncertain, but it may also charge for deliveries of smaller orders, she added.

Bertrand Hug, who owns Bertrand at Mr. A’s and Mille Fleurs restaurants, said he’s seen food prices go up about 15 percent since last year.

Hug said he’s paying about 10 percent more for produce, while beef and fish prices have jumped 20 percent, he added.

Hug estimates that rising food costs, in addition to the delivery surcharges he now pays, will reduce Mr. A’s profit by 5 percent and Mille Fleurs’ by 2 percent this year. Still, he considers himself lucky because his customer count has remained steady.

According to Steve Zolezzi, executive vice president of the Food & Beverage Association of San Diego, which represents 700 restaurant and hospitality companies, eateries are experiencing decreases in both clientele and check amounts.

Sal Giametta, spokesman for the San Diego Convention & Visitors Bureau, said that while visitors have proven to be resilient to prior gas price increases, he’s not so sure about this year.

“Add the global credit crunch, volatility in the stock market, a declining housing market, increased health care costs as well as higher food costs to a significant increase in gas prices and you have a high number of variables that impact consumer confidence,” he said. “The visitor industry is very susceptible to consumer confidence, because when it’s low people will cut back on discretionary spending and that includes leisure travel.”

Effects On Tourism

On the plus side, San Diego is a drive-to destination that traditionally has been able to rely on nearby Los Angeles and Phoenix to supply visitors.

ConVis is concerned, however, that demand for lodging has slowed, both locally and throughout the United States.

According to Smith Travel Research, which tracks the hotel industry nationwide, the county’s innkeepers had an occupancy rate of 68.4 percent from Jan. 1 through the end of March, which was down 3.1 percent from the same period a year ago. For the country as a whole, occupancy stood at 57.8 percent, down 2.7 percent.


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