Oil prices' oozing ripple effect

Increase being felt in more places than just the pump, as escalating costs of petroleum seep into tourism, groceries, fertilizers, tires

Todd Hartmanand Hank Schultz, Rocky Mountain News

Tuesday, June 10, 2008

Darin McGregor / The Rocky

Sammy Toys, 62, cruises on his boat Monday on the waters of Lake Dillon in Summit County. Toys said that last year, his most expensive fill-up was $82. His first fill-up this year cost him $142 at the Dillon Marina fuel dock, where gasoline was going for $5.99 a gallon.

Darin McGregor / The Rocky

The Dillon Marina fuel dock, where gasoline was going for $5.99 a gallon

The rising price of oil is having economic ripple effects far beyond the gas tank.

The most obvious impact is at the pump, where Denver residents groaned at costs for regular unleaded gasoline, $3.73 to $4.16 a gallon on Monday, according to denvergasprices.com

But soaring petroleum prices are pushing into many other sectors, as the price to move goods rises with oil costs. So does the cost of manufacturing, as oil is ubiquitous, found in items ranging from cosmetics to toys and water bottles. A snapshot:

Tourism

Promoters across the country expect tourists to make shorter trips, stay fewer days and spend less. John Cohen of the Durango Area Tourism Office said visits so far are actually up over last year. But, based on flat or declining sales tax returns, "they're not spending as much when they do get here," he said.

In a recent nationwide survey by Access America, a travel insurance provider, 26 percent of respondents said they'll cut back on travel in response to higher gasoline prices.

Cohen said his organization is shifting marketing gears: "We're tightening our focus; we're looking at our regional market. We're looking at the 10-hour (drive time) range."

Groceries

At Cook's Fresh Market on the 16th Street Mall, prices are rising with higher delivery and shipping fees. Some bottled goods have as much as an 80- cent shipping surcharge added, said co-owner Kristi Janos. Often, she has to pass those costs on to customers.

One company has added a $7 surcharge for every delivery, adding up to $1,200 a year. "That's huge," she said. Another company just warned Janos of a price hike for bottled water tied to higher plastic costs, which are directly related to higher petroleum costs.

"Every price has gone up," she said. Even chocolate-covered raisins, of all things. Shipping costs went up, so did the price: from $4.99 a pound to $5.99. Janos struggles to keep prices stable, but it's like pushing down on a waterbed. To keep one product cheaper, another price goes up.

Big-box retail

Target is feeling the petroleum pinch tied to increasing costs of shipping and distributing, as well as of products themselves, many dependent on oil for manufacturing.

Target spokeswoman Hadley Barrows said the company is trying not to pass all those costs to customers, because of the competitive retail environment.

"We work with suppliers to share the extra cost (of fuel) and we try really hard not to pass it on to our guests."

In a recent earnings call, company executives said higher petroleum prices are behind a 5 percent to 11 percent rise in costs for apparel, home goods and other items, Barrows said. The company is trying to squeeze maximum efficiency out of its distribution networks by avoiding having to drive empty trucks and finding the shortest routes, she said.

Tires

"There's a lot of petroleum in tires, both in the production and hauling," said Matt Story, owner/operator of Big O Tires in Greenwood Village. The wholesale price increases have been "dramatic."

Story was reticent about providing specifics. But a Goodyear Tire official told The New York Times last week the company has raised its prices by 15 percent in the past four months.

At Story's shop, fewer people are buying premium brands. "I think people tend to migrate toward the middle of the road, or lower," he said.

One silver lining: People are pulling more fuel-efficient vehicles "out of the mothballs." Those cars, if sitting for a long time, often need new tires.

Corn

Some farmers are enjoying a hot market for corn, with the price per bushel tripling from $2 to $6 in the past three years. But the cost of growing it has soared as well. Fertilizers are petroleum-dependent and diesel is needed to run the equipment that tills the soil, and cultivates, harvests and transports the corn.

Per-acre diesel costs alone have doubled in recent years, from roughly $30 to $60, said Mark Sponsler of the Colorado Corn Growers Association. And farming is still like placing a bet on weather, yield and price - but the cost of placing the bet has doubled, he said.

"Farmers today are risking twice as much as they did three years ago, in order to end up with roughly the same profit," Sponsler said. "The element of risk is much higher; they're borrowing twice as much to put the crop in the ground."

To save diesel, some corn farmers are employing tillage methods that require fewer passes over the field, Sponsler said.

"Fuel prices will cause farmers in Colorado to embrace (that tillage method) at a faster pace," he said.

• June 10, 2008

  4:25 a.m.

  Suggest removal

  windbourne writes:

  Gee, you THINK. The dollar is devaluing quick, causing oil to rise, berneke panders to wall street rather than tame inflation and pubs think that this will cause no inflation? Amazing. We are actually in stagflation, except that berneke has pushed things in one direction. By the time that we hit the election, it should be quite clear that W's and pub's economic policy is a disaster.

• June 10, 2008

  6:27 a.m.

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  flash1 writes:

  Well, the dems said just wait till we get in and control congress, things will be better. We are still waiting. Where are they?

• June 10, 2008

  6:39 a.m.

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  ToeNee writes:

  We put dems in control of congress in 06 to fix the lunch menu. Now you want them to fix the nation?

• June 10, 2008

  6:44 a.m.

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  Earl writes:

  windy the only people pushing your inflation recession idea is the dumpocraps. look at the low rate of unemployment, interest rates. unemployment is lower than the 8 years of clinton but thats not good enough for the dumps. as flash1 states we are waiting for the dems to show up and when they do please dont let it be for long. with all the government they want and the pandering bo is doing with his 'tax cuts for the working' jobs will be cut in half as employers will be taxed out of business just to pay for the hand outs.
  bo wants to be the second term of the carter administration. hold on for a shock on that one.

• June 10, 2008

  7:15 a.m.

  Suggest removal

  DahmersCookbook writes:

  I want this to impact the illegals and thier hideous vehicles, vomit! I will take up the long forgotten practice of praying to ensure this. Gas prices will soar!!! They can't avoid this like insurance, hehehe.

• June 10, 2008

  7:18 a.m.

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  danirobi writes:

  The US Senate is supposed to be voting today on Windfall Profits Tax on Oil Companies. This is the only solution the Democrats have, tax the oil companies because they and President Bush are to blame for everything. Democrats haven't done anything since taking office in 2006 and gas prices have actually gone up $1.83 and they have no plan in sight. They continue to vote down drilling in this country yet they keep saying that we need to break away from foreign oil. Sorry Nancy Pelosi and Harry Reid, but you can't have it both ways. I'm for renewable sources, but the technology is still being studied. DRILL HERE, DRILL NOW, PAY LESS!

• June 10, 2008

  8:02 a.m.

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  ham writes:

  The Democrats answers: Tax the oil companies, and put the Polar bear, who's numbers are increasing, on the endangered species list. Don't drill, don't allow refineries, don't allow nuclear power plants. Above all, put global warming (1996 style) as the greatest threat to us.
  How's that swing to the left working for ya, America?

• June 10, 2008

  9:04 a.m.

  Suggest removal

  djbrav writes:

  Wow - looks like all the Bush huggers are out in numbers today. Despite all the rhetoric regarding greenhouse contributing emissions and global warming, OIL IS A FINITE RESOURCE! i.e. we need to find a new and more efficient solution at some point. Quit being a typical NIMLS (not in my life span) conservative and start thinking outside your normal short sightedness. Bush has run up the national debt to record numbers to keep your taxes down so you can instead spend it on your cheetos and x boxes. Go ahead and drill in ANWAR, kill off some species, it will run out and we will be right back in the same place we are today. Or we can tighten the belt and deal with it today. Let me help you with this one: New domestic fuel sources = less dependence on foreign oil + new jobs created.
  In the mean time go buy a bike. You people need some fresh air and exercise.

• June 10, 2008

  10:24 a.m.

  Suggest removal

  dakar writes:

  Yes, pursue other means of energy. Increase research into cleaner coal, solar and wind. Do all of that. But we also need to Drill for the Oil we do have. And that means ANWR and the US Coasts. China is drilling off the coast of Cuba in waters that US compaines are prevented from by our own congress. AND congress is preventing imports of ethanol from Brazil (there all cars are E85). People - WAKE UP. These are not issues relating to only Dems or Rep. - their all to blame.

• June 10, 2008

  10:28 a.m.

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  jay writes:

  I never have understood this conspiracy theory parrotted about dems restricting drilling.

  they've nearly tripled the drilling permits in the last 2 years.

  how is that restrictive?

  I don't get it.

  anyway, the price of fuel is one of the reasons that real wages have largely stagnated under the republican reign. that and the skyrocketing costs of insurance and healthcare.

  four more years of the same under mcbush?

  I'll pass.

• June 10, 2008

  10:54 a.m.

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  Squatch writes:

  Go ahead an drill in ANWAR then we won't use the oil for our country since it wont be profitable instead we will sell it to China or some other country. Once again neither party is in the political business to help out their fellow American unless you put money into their pockets.

• June 10, 2008

  11:07 a.m.

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  Marshdale writes:

  Earl; I don't know where you get your unemployment numbers, but they are wrong. Clinton started out with a 7.5% unemployment rate and ended with 4.1%.The lowest in 30 years. The current unemployment rate is 5.5%. Secondly you say dems will tax companies to death. Do you know what the marginal tax rate on corporate profits was during Eisenhower? You should check it out and compare it to today. Just how do you think Eisenhower got the money to build an interstate highway system? It was not by taxing the working man alone. Corporations have stopped contributing to the commons ever since Reagan. Look at what is happening to our infrastructure now. Corporations need to pay taxes. Sorry!!

• June 10, 2008

  11:16 a.m.

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  RainbowWarrior writes:

  Drilling for deminished supplies of fossil fuels is a great destraction for all that old oil money. I hope some of the posters here continue their support and investment in oil, gas and coal so guys like me that have supported and invested in the renewable alternatives can continue to build passive and active solar system like the one just installed at DIA and can cpapture the market before they get a clue.

  Just a remeinder Squatch, Earl and the rest; I've been laughing at you for years now as I make deposits to the bank from those profits you haven't figured out how to generate for yourselves form the Jimmy Carter years of inovation and efficiency that you laugh at.

  I guess he who laughs last laughs best... He He He

  You should learn to channel all that frustration somewhere that can have a positive outcome, rather than clinging to the past like a plastic life saver thrown from a sinking ship.

  Think of me as you write your next big check to Excel energy because you live in a big stupid house and have an energy dependance on the centralized system. I had to spend a little time and money last week on Windex to clean my active solar panels because I noticed my electric credit last month was down a little, but it's back up agian. Just wish I could turn that credit on my account into cash!

• June 10, 2008

  11:38 a.m.

  Suggest removal

  jay writes:

  "How do the repubs manage the cost of oil or a gallon of gas?"

  let's go over it one more time for the cheap far right wing seats for yiota and pjmama.

  supply and demand can't account for all of the increase in gas prices. not even close. not even remotely close. drilling isn't going to solve the problem. you also can't blame rampant speculation on all of the problems either. you asked what repubs had to do with this mess we're in, yiota.

  republican policies brought us cheney's energy policy, devalued the dollar and destabilized the middle east.

  take a look at the progression again:

  1992

  $19/barrel

  $1.05/gallon

  2000

  $23/barrel

  $1.42/gallon

  today

  $135/barrel

  $4.00/gallon

  what happened in 2001-2003 that led all those spectators to suddenly realize that oil is a commodity and will skyrocket? gee...it's on the tip of my tongue...could it be the hugely irresponsible fiscal policies that led to record debt, huge trade deficits and the gross devaluation of the dollar? couldn't be. how about the foreign policies that helped to further destabilize the planet's region with the most oil under it? shocking to consider....but that can't be it either.

  as much as pjmama would like to pretend...it isn't those scary environmentalists that have caused our gas to skyrocket either, as congress has nearly tripled drilling permits over the last 2 years.

  there's plenty of blame to go around folks, but let's keep one thing straight...voting for more of the same policies that have contributed to the problem isn't the most intelligent way to deal with the issue.

• June 10, 2008

  11:40 a.m.

  Suggest removal

  M2 writes:

  For all of you with all the answers... please run for office. If this issue is so cut and dry by all means step up to the plate.

  On a personal note... I love to see those big trucks and SUV's bearing an American flag and a big Ol "W" sticker at the pump. I hope you enjoy paying outta your @$$ to get 10 MPG.

• June 10, 2008

  12:07 p.m.

  Suggest removal

  mcbrink26 writes:

  What happens when 2 Toyota Priuses crash?

  A panda is born in a Whole Foods parking lot.

• June 10, 2008

  3:08 p.m.

  Suggest removal

  rj1967 writes:

  Drill, Drill, Drill. I'm so sick of hearing this. It reminds me of what many Americans do when they run out of money - charge it. When their credit cards get full, they just go get another one. Drilling is the equivalent of getting another credit card. \

  When gas goes up to $10 a gallon the trucking industry will go broke. Frieght will be carried on frieght trains. Before we can do that tho, we will need more railroad tracks, more locomotives, and more frieght cars. Maybe we can bring back the steel industry to help us with this. We will also need more light rail tracks and cars. Lets stop screaming drill, drill, drill, and get on with building a more efficient transportation infrastructure. (the longer we wait, the more it will cost.)

• June 10, 2008

  4:01 p.m.

  Suggest removal

  Squatch writes:

  Trains arent the answer they run off diesel and the railroad companies are the largest consumer of diesel fuel. They leave trains running even if they arent going anywhere and are just sitting in the yard. Go ahead and ask them.