Businesses drop surcharges as gasoline prices continue to fall

The relief that lower gasoline prices have brought to consumers has extended beyond the pump.

The average local cost of a gallon of unleaded gasoline slipped below $2 a gallon in November for the first time since February 2005, and that milestone has area businesses dropping or reducing fuel surcharges.

Pink Jeep Tours of Las Vegas plans to ax its 2-year-old surcharge beginning today. The Nevada Taxicab Authority on Nov. 13 canceled the 25-cent-per-mile surcharge its board adopted in June, though a 20-cent surcharge from May 2007 became permanent over the summer. UPS slashed its fuel surcharge from 8.25 percent in November to 6.75 percent in December. Even the Las Vegas Review-Journal eliminated a 7 percent surcharge on home delivery.

Consumers won't necessarily recognize major savings. Pink Jeep's $5 surcharge, for example, was a small portion of the $209 to $229 the company charges to take tourists to national parks such as the Grand Canyon, Zion and Death Valley. Still, fall's plunging gasoline prices obligated the tour operator to drop the fee, said general manager Alix Reed.

"It's the only fair thing to do," Reed said. "I don't think the $5 is going to be that big a difference, but when our (hotel) clients' customers come up to the desk to buy a ticket and they see a gasoline charge on there, it's not fair. It's the principle of it. If you raise fees because gas prices are higher, then you have to lower them when gas prices fall."

Over at the taxicab authority, recommendations for the summertime surcharge included a provision allowing Administrator Gordon Walker to remove the fee if fuel prices dipped below $4 a gallon for 20 consecutive days.

"The temporary surcharge was dealing with economic conditions that were probably going to fluctuate," said Elisabeth Shurtleff, public information officer for the authority's parent agency, the Nevada Department of Business and Industry. "You don't want to penalize tourists for economic conditions that have now improved."

Business watchers offer mixed observations on whether fuel surcharges are broadly vanishing.

Reed said she doesn't know of any other tour operators who have nixed extra fees.

Gordon Absher, a spokesman for MGM Mirage, said some of the concierges who book activities for hotel guests knew about Pink Jeep's fee reversal, but they hadn't yet heard from other tour operators calling off fuel surcharges.

One local florist said the freighting companies that ship his goods into Las Vegas haven't yet dropped their surcharges.

John DiBella, owner of DiBella Flowers & Gifts on West Charleston Boulevard, said lower gasoline prices give him a break on his own delivery costs, but none of his other business expenses -- from hard goods to trucking charges -- have fallen.

That means the $2 or $3 increase in delivery charges the company began levying when fuel cost about $3 a gallon will stay for now, though DiBella said he'll re-evaluate the fees after Jan. 1 if gasoline prices remain low. He stopped raising delivery fees once fuel hit $3.50 a gallon because he didn't believe his customers could absorb the higher cost. He tweaked efficiencies and ate price increases as fuel spiked to a record $4.27 a gallon locally in June.

"It (the price gain) happened so quickly, our heads are still kind of spinning in terms of what direction to go," DiBella said. "We didn't jump up delivery charges like they could have gone up, so we'll look at reducing them slowly. We'll probably start reducing them before too much longer if everything stays down."

The American Trucking Associations doesn't track fuel surcharges or fees. But among truckers nationwide, surcharges rise and fall with the price of fuel, so if the price of diesel drops, fuel charges would typically fall as well, said Bob Costello, chief economist with the Virginia trade group.

Michael Geeser, a spokesman for travel club and fuel-cost monitor AAA, said he hadn't heard of any widespread movement to scrub surcharges. But it would make sense for the fees to disappear as gasoline prices plummeted, he added.

Because most surcharges were small, removing them boosts consumers' attitudes more than their pocketbooks, Geeser said.

"Perhaps consumers now feel as if they're getting more value for their dollar and might be more willing to spend," he said.

Given increases in unemployment and cuts in wages, though, neither businesses nor consumers reap the full benefits of lower fuel costs.

"For people who are in the business of transportation, this has been a real double-edged sword," Geeser said. "On the one hand, they're realizing huge savings on fuel costs, but I'm willing to bet most people are hurting for customers. The good news is, those fuel prices they have to pay are coming down. But so is their client base."

For now, at least, the surcharge respite should continue.

Oil prices continued to drop Thursday, falling to $43.67 a barrel. The cost of crude, which makes up more than half of a gallon of gasoline, is down sharply from its July 11 high of $147.27. A gallon of regular unleaded gasoline averaged $1.90 in Las Vegas on Thursday, according to AAA. That compares with $2.60 a month ago and $3.13 a year ago.

Reed said gasoline prices would have to jump back to $3 or more a gallon before she'd reinstate Pink Jeep's fuel fee.

The taxicab authority doesn't peg a particular threshold for imposing surcharges. Rather, it weighs surcharges case-by-case based on economic conditions.

"We want to adjust it accordingly without having too much of a negative impact on the tourists coming to town and using taxicabs," Shurtleff said.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.