Fuel cost falls, but caution remains

Local gasoline prices fell nearly 10 percent between July 8 and Wednesday, but experts say the drop hasn’t restored the fuel-consumption habits of consumers or businesses.

Sure, a cost decline of 39 cents a gallon in five weeks sounds impressive — until you remember regular, unleaded gasoline went as high as $4.23 a gallon here in July. That would bring Wednesday’s price per gallon to $3.84, according to numbers from travel club AAA.

Alix Reed, general manager of Pink Jeep Tours in Las Vegas, said she will take any price cut she can get. Her business runs 28 Suburbans and Jeeps daily, taking tourists to destinations including the Grand Canyon, Zion National Park and Valley of Fire. The company’s gasoline tab ranges from $25,000 to $35,000 a month.

“This is a really big break for us,” Reed said. “We’re really excited. We were asking, ‘What will we do when it goes over $4.50?'”

But a fuel surcharge Pink Jeep Tours imposed two years ago will stay. That is because prices remain well above the $3 or so per gallon that gasoline cost in 2006.

Plus, the company plans to roll out new Tour Trekkers in about two weeks. The Trekkers operate on diesel fuel, which continues to hover near $4.50 a gallon. The custom tour trucks seat four more customers per vehicle than the company’s existing fleet accommodates, so that should defray some of the cost, Reed said. Still, Pink Jeep needs its surcharge — $5 per person on full-day trips of $200 to $250 — to cover its expenses.

If area companies seem loath to shed the operational tweaks that helped them grapple with high fuel costs, consumers might hang on even tighter to the adjustments they deployed.

Michael Geeser, a spokesman for AAA, said motorists have made “a conscious decision” to cut back on how much they drive throughout 2008, and getting them to revert to form will take time and much lower prices and a stronger national economy.

AAA’s analysis of summertime travel trends predicted about a 1 percent decline in the number of travelers hitting the skies and roads for vacations over Memorial Day weekend and the Fourth of July. The travel club will not release its projection for Labor Day traffic until Aug. 26, but Geeser said he suspects that report will show a slight decrease in holiday travel.

“The price break is probably not enough (to boost tourism),” Geeser said. “When you consider that we are more than $1 over where we were last year, I would think, in the minds of most consumers, that the price would have to go down further for people to start changing the conservation habits they’ve developed over the last year. People have changed the way they are driving and commuting, and I think that is going to continue.”

The Las Vegas Convention and Visitors Authority does not track the relationship between fuel prices and tourism volume. But visitor volume in the local market fell 0.5 percent through June when compared with the first six months of 2007.

Erika Pope, an authority spokeswoman, said it’s tough to pinpoint how much of the falloff came from gasoline costs and how much resulted from broader economic travails such as rising unemployment. It’s also too early for officials to evaluate whether more vacationers have visited Las Vegas in recent weeks as fuel prices have dipped.

Businesses outside tourism can’t claim big relief, either.

Delivery charges at The Tiger Lily Flower Shop, where orders average $50, grew from $8.95 in 2006 to $10.95 today. The company’s owners also upped fees on some special deliveries. The reason: Delivery costs in the fiscal year that ended June 30, 2007, jumped 50 percent when compared with fiscal 2006, co-owner Eugene Godina said.

He said he has not crunched the numbers for fiscal 2008 yet, but he does not need to see the specifics to know that fuel costs have hurt local small businesses. Prices have trended so high for so long that recent declines will not make a big long-term difference for many businesses, and that’s why fuel surcharges in industries across the board probably will stick around, Godina said.

“We’ve seen such a drastic increase in prices that I don’t know of any business that’s been able to cover those costs with adjustments in freight and delivery prices,” he said.

Analysts predict bigger price breaks through summer’s end. Crude oil, which makes up more than half of a gallon of gasoline, ended Wednesday at $116 a barrel, down from a record $147.27 per barrel on July 11.

Phil Flynn, a vice president and energy analyst with Alaron Trading Corp. in Chicago, told the Review-Journal two weeks ago that fuel prices could shed another 25 cents to 50 cents a gallon by Labor Day, barring hurricanes in the oil-rich Gulf Coast and geopolitical tensions among crude-producing countries. A drop to $3 a gallon would not be inconceivable, Flynn added.

Even that might not spark big gains in travel, Geeser said.

“The tipping point was $4 a gallon,” he said. “That’s when people realized they had to change, and they did. From here on out, people most likely will not drive the way they used to. It’s hard to say people would go back to what they were doing just because prices went just under $4 a gallon.”

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

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