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Tampa Bay area companies struggle with high price of gasoline

When gas prices began skyrocketing, Timothy Pappas, owner of a St. Petersburg ice cream company called Working Cow Homemade Inc., broke into a sweat.

His fuel bill climbed from $1,700 a week to $3,000. He had two choices to save his business from a meltdown: raise prices or trim expenses.

Pappas decided to cool it with the costs. He consolidated delivery routes for his trucks and asked his drivers to spend nights in hotels, instead of returning and driving the same route the next day. He is getting rid of two of the six trucks in his fleet soon and he has already extended his delivery time from five to seven days a week.

Pappas isn't the only one making tough choices. Across the country small business owners are particularly hard-hit by rising energy costs, according to a study released in April by the Office of Advocacy of the U.S. Small Business Administration. The American Express Small Business Monitor, a semiannual survey of business owners, shows the percentage of business owners reporting lost sales because of the higher costs doubled to 35 percent from 17 percent in the fall. The same survey found that 33 percent of business owners raised their prices to compensate for higher fuel costs, up from 26 percent in the fall.

"It's stifling small businesses," said Mario Iezzoni, an analyst at the University of South Florida's Small Business Development Center. "They are dealing with cash-flow problems and scaling back employees. They have been hit hard. Real hard."

Most businesses don't fancy passing on the cost to customers, but with no relief in sight, some are taking that extreme step. In a recent poll of nearly 1,900 service companies nationwide conducted by Angie's List, 85 percent of respondents said gas prices were chewing into their profits. About 60 percent of the businesses said they were passing the extra costs on to their customers.

At Gumby's Pizza & Grinders on Fourth Street N. in St. Petersburg, owner Jack Caramello raised his delivery fee by 25 cents. Caramello has been in the industry for 15 years and said he has never seen it this bad.

"We had to raise the commission for delivery guys twice this year alone," he said. "It's a second job for most of them and if they don't make a certain amount of money then it's not worth it for them."

The problem isn't limited to fuel. Prices have gone up across the board. These days Caramello pays $13 for a 25-pound bag of flour; a year ago he paid $6 for the same amount.

The bad news? It could get worse.

"Every year gas prices go up on Memorial Day," said Brad Kamp, associated professor of economics at the University of South Florida. "We may see a hike of as much as 20 to 25 cents per gallon."

Kamp blames it on the falling dollar and people using oil to hedge against it. So prices will continue upward even if there's no real shortage.

Vicki Kuehne, owner of Mostly Roses Florist in Clearwater, finally succumbed to the pressure and raised her prices.

"We held off until two weeks ago," she said. "Most people have been very understanding about it."

Kuehne says she expects the fuel problem to even out soon, and blames the media for discussing sordid tales about the economy.

Others aren't that optimistic.

"It's going to be a crisis point soon," said Iezzoni of USF. "Ninety-five percent of businesses are very tiny, and if they keep absorbing these costs they will be saturated soon."

When that happens, he said, the businesses will shut down.

Madhusmita Bora can be reached at mbora@sptimes.com or (813) 225-3112.

Tampa Bay area companies struggle with high price of gasoline 05/04/08 [Last modified: Thursday, May 8, 2008 1:54pm]
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