washingtonpost.com  > Business > Special Reports > Energy

Quick Quotes

Page 3 of 3  < Back  

Higher Oil Prices Soon To Squeeze Consumers

"It was environmentally a good decision," said Tara Connell, spokeswoman for the McLean company. "What we discovered after we made the change, I'm told, is we actually got better color."

Ford Motor Co. has shifted away from heating oil to natural gas as a power source for the boilers in its factories, said George Andraos, director of energy supply and efficiency. Ford, based in Dearborn, Mich., made the switch for environmental reasons, cost efficiency, improved reliability and safety, he said.

_____  Gas Prices _____
What's Behind Rising Prices at the Pump? Motorists are aware of how much they pay for gas, but few know the reasons behind the soaring prices.
Special Report: Gas Prices

__  The Department of Energy __
Compare Vehicle Fuel Efficiency
Most/Least Fuel Efficient Vehicles
Gas Mileage Tips

__  On the Web __
AAA Fuel Cost Calculator


Since the late 1980s the diversified technology company 3M Co., based in St. Paul, Minn., has reduced the amount of oil-based solvents it uses to manufacture various tapes and other items, said Katherine E. Reed, a vice president for environmental health and safety.

However, many manufacturers, builders, transportation companies and other businesses say their profit margins are starting to be squeezed severely as they pay more for crude oil, diesel fuel and petroleum-based materials such as plastics, chemicals and asphalt.

Whirlpool, of Benton Harbor, Mich., said its costs rose by $60 million worldwide in the three months that ended in September, compared with the same period last year. They are expected to keep rising, by another $100 million in the last quarter of this year, compared with the final quarter of last year, because of higher materials and transportation costs. Some of the materials costs were for pricier metals, but the biggest change was in the cost of oil-based plastics, Fettig said.

Whirlpool's planned price increases are "unprecedented," both in size and scope, he said, adding that they are "appropriate" given "the magnitude of the raw material, the oil and the logistics costs increases we're incurring."

In contrast to Whirlpool, many companies, such as airlines and home heating oil suppliers, say they cannot pass on rising oil costs because of fierce competition.

Petro, a unit of Star Gas Partners LP, has seen the wholesale price it pays for home heating oil soar 90 percent over last year. But it has passed only about half that increase to its customers, said David Shinnebarger, the Stamford, Conn.-based company's chief marketing officer.

"We . . . can't pass it on to the consumer," he said. "If we did we'd have a number of issues: We'd have customer attrition issues, we'd have consumers who wouldn't pay their bills, high accounts receivable."

Petro, which services 524,000 customers from Boston to Virginia, competes against hundreds of smaller companies. "Customers are shopping around," Shinnebarger said. "It's a zero-sum game. Our competitors' customers are calling us. Our customers are calling other companies."

Many publicly run transit systems across the country have to absorb higher diesel fuel costs because of the political resistance to raising fares.

The Washington Area Metropolitan Transit Authority buys diesel fuel for its buses in bulk, resulting in a discounted price, and pays no taxes. Even so, recent fuel bills totaled $1.52 a gallon, much higher than the 97 cents a gallon the agency budgeted.

Metro plans to absorb the added cost by trimming other expenses, and it has not discussed raising bus fares, said Jack Requa, chief operating officer for Metro's bus service.

"We keep an eye on it," Requa said. "There's not much we can do about it."

Construction companies also have been hard hit by rising oil prices because they pay to transport building materials, they buy diesel to fuel off-road vehicles such as cement mixers and dump trucks, and they buy oil-based materials such as asphalt and plastic pipe, said Ken Simonson, chief economist for the Associated General Contractors of America, the trade association for builders of non-residential structures.

These companies typically win a contract for a construction project, such as for a bridge, school, office building or highway, by submitting a bid to do the work at a fixed price, sometimes many months before the work starts. They are therefore generally stuck with any subsequent rise in fuel or materials prices, Simonson said. But they will often try to raise their own prices in future bids, he said.

He said of the recent oil price spike, "For the most part, [companies] have had to eat it and bid higher the next time."


< Back  1 2 3

© 2004 The Washington Post Company