Increased prices at the pump hitting local businesses hard

Gasoline prices in Lincolnton reflect the crisis that is occurring all across the nation. In the last 10 years, the price of crude oil has risen from $16 a gallon to $101, creating hardships for both businesses and individuals. Sadly, experts do not predict any significant relief in the near future.

"Fuel prices are killing this industry," stated Price McWhorter of McWhorter Logging. "Since October of 2007, I've had to let 11 people go because business was slowing down. High fuel prices are having a tremendous effect on our operation. It's horrible."

Jonathan Cogan, an energy information specialist with the United States Department of Energy, said the recent increase in the cost of gas and diesel fuel is mainly the result of an increase in world crude oil prices, which are at near record highs, having topped $100 per barrel (42 gallons) during the past few months.

In turn, the sky-rocketing cost of crude oil is the result of economic growth, which continues to increase, particularly in Asia. This growth is driven by energy use, primarily petroleum.

"Production has not kept pace with the strong growth in demand, and what gives is the energy prices," explained Cogan.

Other factors affecting the cost of crude oil include political events and conflicts in major oil producing regions and the declining value of the U.S. dollar. "In addition, some OPEC countries limit production to keep revenues up," said the energy information specialist.

What follows is a look at the cost of crude oil over the last 10 years:
1998 - $16 per barrel.
1999 - $19 per barrel.
2000 - $30 per barrel.
2001 and 2002 - $26 per barrel.
2003 - $31 per barrel.
2004 - $41 per barrel.
2005 - $56 per barrel.
2006 - $66 per barrel.
2007 - $72 per barrel.
March 31, 2008 - $101 per barrel.

The cost of crude oil accounts for almost 70 percent of the price of gasoline at the pump.

The most common products made from crude oil are energy products: gasoline, heating oil, and diesel fuel. Other petroleum products are ink, crayons, bubble gum, dishwashing liquids, deodorant, eyeglasses, records, tires, ammonia, asphalt, and heart valves.

In other items of information, Cogan reported on the annual cost averages of both gasoline and diesel since 1998 in the Department of Energy's Lower Atlantic Region, which encompasses Georgia, Florida, North Carolina, South Carolina, Virginia, and West Virginia. These cost averages are:

1998 - Regular gasoline, 97 cents a gallon; diesel, $1.01 a gallon.

1999 - Gasoline, $1.06; diesel, $1.07.

2000 - Gasoline, $1.42; diesel, $1.45.

2001 - Gasoline, $1.32; diesel, $1.35.

2002 - Gasoline, $1.27; diesel, $1.28.

2003 - Gasoline and diesel, $1.48.

2004 - Gasoline, $1.80; diesel, $1.78.

2005 - Gasoline, $2.25; diesel, $2.36.

2006 - Gasoline, $2.53; diesel, $2.65.

2007 - Gasoline, $2.73; diesel, $2.83.

March 31, 2008 - Gasoline, $3.27; diesel, $3.94.

Nationwide, the cost of gas now averages $3.29 per gallon.

"Nominally, gasoline prices are at record levels," said Cogan. "But factoring in inflation, the average price of gas in March of 1981, using today's dollar, was $3.40 per gallon. On the other hand, diesel fuel is higher than ever, both nominally and adjusting for inflation."

According to logger Price McWhorter, "In January of 2007, the price for a load of diesel fuel was $2.07 a gallon. Then, about two weeks ago, I paid $3.87 for the same fuel.

"On the average our trucks get five miles to the gallon. So in January of last year, the cost of fuel for a 200- mile round trip amounted to $82.80; now, the same haul costs us $154.80. This doesn't include the tires, the engine oil, and everything else that has gone up because of the increased cost of crude oil.

"The bottom line is we're trying to figure out ways to cut corners wherever possible to offset the increased cost of diesel fuel because we can't run without it.

"We need to be drilling for oil here in the United States so we won't be as dependent as we are on foreign countries for oil."

McWhorter went on to point out that the drop in the housing market directly reflects increased gas and diesel prices. "It's taking everybody's money just to get back and forth to work.

"And with fewer houses being built and gas prices what they are, sawmills are not running at full capacity, and some have even closed," he added.

As if things were not bleak enough, the immediate future does not look particularly bright.

"We are projecting gasoline prices to peak at somewhere between $3.40 and $3.50 per gallon in May of this year," said Cogan. "However, they should level off later in the month and even decline slightly in June. Still, we don't see a dramatic decrease in prices in the near future."

On Monday, March 31, gasoline prices ranged from $3.16 per gallon to $3.29 in Lincoln County. As for diesel fuel, prices ran from $3.95 per gallon to $3.99.

One local institution that has been greatly affected by the increases in the cost of energy is the Lincoln County School System, which has 22 buses on the road at the present time.

According to School Superintendent Randall Edmunds, "We budgeted $105,000 for fuel for FY 2008. We're concerned that with four months left in the fiscal year, we will run from $10,000 to $20,000 over what we budgeted. At the start of the year, the cost of diesel fuel was $2.41 per gallon. On our last bill, the cost was $3.23 per gallon - an increase of 34 percent."

The school system spent $79,402 on gas and oil for buses in FY 2006; $82,158 in FY 2007; and $120,000 to date this year.

"If we do go over budget, we'll have to use money from the Fund Balance or another category where it looks as if we're not going to spend the budgeted amount for the year," the superintendent continued. "We will definitely budget more funds for fuel in the FY 2009 Budget because it has been predicted that fuel costs will continue to increase."

Another big gas customer is Lincoln County Government.

"We're trying to cut back on traveling as much as we can," said County Commissioner Chairman Walker Norman. "Still, the price increases are killing us."

Like the board of education, it appears as if the county will also have to provide more funding for gasoline and diesel fuel in next year's budget.

"There are certain vehicles that have to run - it's going to cost more, but we don't know how much more," said Norman.

Among the other businesses affected by the price increases are Aycock Truck Parts, Inc. and Woodchip Transport, Inc.

"People are buying just what they need to get by - they want just enough parts to get to the next week," said Barney Aycock, spokesman for the two companies.

As for the transport business, he stated, "Compared to last year, the cost of a load of fuel has soared. It's really jumped since February 1 of this year."

Aycock went on to say that while the chip hauling business has been good, the cost of fuel is rising so fast, his company has not been getting paid enough to offset the cost of hauling the product to the wood yards. "The corporate people aren't moving fast enough to pass down funds to offset the increase in fuel prices, and consumers are catching it.

"Our profit margin is getting down to nothing. I don't know when it will stop - I guess when we get into the red."

In her remarks, Megan Barnett, a spokesman for the Department of Energy, reiterated some of what Cogan said: "High energy prices are an unanticipated tax on American families. The world is currently experiencing a tight supply and demand environment where the demand for oil is outstripping its supply.

"These prices reflect the rapidly increasing energy appetite of countries around the world, especially China and India, and a lack of significant investment in new oil production.

"In the U.S., through President Bush's energy initiatives and energy legislation passed in 2005 and 2006, we are working to increase clean, affordable and reliable supplies of energy in the market and dramatically increase the efficiency of our vehicles and buildings through technological investments," Barnett continued.

"We continue to call on Congress to work with the administration to expand domestic oil and natural gas production in an environmentally responsible manner, paving the way for increased domestic refinery capacity, and to enable the infrastructure development necessary to ensure adequate energy supplies for all Americans."

Long-term plans not withstanding, apparently there will be no relief forthcoming in the immediate future for consumers.

"I can't travel as much as I'd like to," said Travis Reid. "I stay right here in Lincolnton instead of going out of town to visit loved ones.

"It's also costing more to heat my house," he continued. "I'm trying to use as little gas as possible. However, I'm really concerned about the less fortunate and how they are going to make it with gas prices as high as they are."

Lamar Garrard, who works part time at Publix in Augusta, said he and his wife are trying to combine trips so as not to do any extra driving.

"I remember driving a company car in Atlanta when I got my first job after college - gas was 16 cents a gallon in 1967."

According to Mike Townsend, owner of Broad River General Store, "Instead of people getting $5 worth of gas, they get $10, because $10 is only a little over three gallons worth of gas.

"Moreover, people who do not ordinarily buy gas from us are stopping by and checking gas prices. If we are cheaper than the gas in town, then they fill up. Even at over $3 a gallon, one penny still matters."

Michelle Clark said she travels approximately 25 miles one way to work, and it is amazing how the miles add up. "I'm glad I work three days on and three days off."

Clark, whose house burned down recently, likewise commented on the tremendous amount of gas it took to heat the house. "I purchased 200 gallons of propane for $516, and it lasted three weeks. Instead of gas, we started using a buck stove to help heat the house. Also, we watched how much electricity we were using to cut down on that bill."

In her comments, Yvonne Bonner simply said, "It's getting tough. We all need to trust the Good Lord, and he will get us through it."