Fuel costs pinch Vegas firms

Grace Leong

Wednesday, Feb. 26, 2003 | 11:15 a.m.

Las Vegas businesses and some workers are trying to deal with higher gasoline prices, and local trucking companies are trying to pass on their extra fuel costs by hiking rates.

But grocery chains like Kroger Co.-owned Smith's Food & Drug and Food 4 Less, which have most of their product delivered by trucks, say they're absorbing the increased fuel costs for now and are not passing them on to consumers.

Likewise, the Nevada Taxicab Authority said it has not received any requests from the industry to raise rates.

That's partly because Yellow-Checker-Star Cab Co., the largest cab company operating in the area, has a propane-fueled fleet and propane prices are traditionally not as volatile as gasoline.

Some gas price relief for consumers and businesses may be in sight, said Sean Comey, a AAA spokesman in Nevada. He sees the recent upward price trend nationally starting to stabilize as more supplies become available after a national strike ended in Venezuela.

Tighter supplies caused by the Venezuela strike and some Californian refineries going offline for maintenance, combined with higher crude oil prices and uncertainty over war prospects with Iraq, pushed retail prices of regular unleaded in February to some of the highest levels AAA has seen since it began tracking prices in the 1970s, Comey said.

Gas prices in Nevada on Tuesday averaged $1.81 a gallon compared with the national average of about $1.66 a gallon. That's because Nevada receives most of its gasoline from California, which is averaging about $1.95 a gallon for regular unleaded. Las Vegas gas prices are up 44 percent from a year ago, AAA said.

The hoped-for price stability may be short-lived as March is historically the start of the spring and summer driving seasons -- when rising demand tends to fuel price increases, Comey said.

Meanwhile, some people who drive on the job, such as pizza delivery drivers, are being pinched by higher gas prices.

In addition to receiving minimum wage and tips from customers, drivers at pizza delivery companies like Domino's also receive a per-delivery stipend averaging between 60 cents and $1, said Holly Ryan, spokeswoman for Ann Arbor, Mich.-based Domino's. That stipend helps the driver cover gas and car maintenance costs.

"When gas prices go up, it eats into the driver's stipend. But when prices go down, the drivers can make some money on the stipend," she said. "Despite the recent increase in fuel costs, Domino's isn't increasing the stipend. We encourage customers to be more generous when tipping drivers that deliver good service."

Ryan said Domino's has 22 corporate-owned stores in the Las Vegas area.

For trucking companies such as Pan Western Corp. of North Las Vegas, fuel surcharges have to be imposed to offset its costs of "running the freight," said Wes Purcell, Pan Western's controller.

Pan Western operates nationwide delivering freight like perishable goods, raw materials and heavy construction equipment for clients including Home Depot, Coca-Cola Enterprises Inc. and Ocean Spray,

"But these fuel surcharges ... which kick in when the national average prices of diesel posted by the Department of Energy exceed $1.49 a gallon ... are squeezing the company's bottom line," he said. Average diesel fuel prices in Las Vegas area are about $1.99.

"That's because we can't pass all of the fuel surcharges to the customer. If, say, there's a 10 cent increase in fuel costs, we can try to pass on 6-7 cents to the customer," Purcell said.

But Jim Mellen, a Pan Western dispatcher who coordinates truck deliveries to and from the company's clients in California, Arizona, Utah and Nevada, said the fuel surcharges haven't significantly affected business yet.

"Given the amount of product transported from (businesses in) these states to Las Vegas and back, it's more of a strain on the customer to find an alternative truck carrier that won't impose fuel surcharges," he said.

"Fuel surcharges, which are a percentage of whatever the freight cost is, are about 10 percent from 1.5 percent three to four months ago. That's unusual because our fuel surcharges are typically between 2 to 3 percent," Mellen said.

Meanwhile, officials for Smith's and Food 4 Less said they don't plan to pass on the higher fuel costs in the form of higher grocery prices to consumers.

Marsha Gilford, Smith's spokeswoman, said it isn't unusual to experience fluctuations in fuel prices and that those costs are only a "small part of so many other factors" that determine the prices of groceries.

"We've been able to ride it out in the past. We anticipate prices to level out or stabilize," she said.

Gilford said Smith's uses outside trucking companies to deliver product to its stores in Las Vegas, New Mexico and Northern Arizona.

Terry O'Neil, Food 4 Less's spokesman, agreed, saying that like many other businesses, his company is closely monitoring the fuel costs trend.

Meanwhile, Bill Shranko, director of operations for Yellow-Checker-Star Cab, which operates a propane-fuelled fleet, said it hasn't been hit as hard by the fuel crunch as other cab companies that have vehicles that use gasoline.

"Propane prices aren't structured the way gasoline pricing is. Propane costs have gone up, but not as rapidly as gasoline. Also (helping is the fact that) we do bulk volume purchases months in advance," he said.

Shranko said the cab companies haven't yet requested fuel surcharges from the Taxicab Authority because the fuel cost spike is fairly recent.

"This increase has gone on only in the past few weeks, so there's a chance prices could go down. We are all watching the situation closely," he said.

Shranko said his drivers, represented by the Industrial Technical Professional Employees union, aren't charged for fuel. But he said some other cab companies have union contracts that require drivers to pay a portion of the gas costs.