Delivery firms take big hit

Friday, May 28, 2004 | 11:16 a.m.

Harvey Johnson is seeing rising gasoline prices eat away at his profits.

Johnson, president of City-Xpress Inc., a 13-year-old business that delivers produce and beverages, has watched his fuel costs nearly double in the past four months, from $4,100 a week to $7,800.

"There is no way I can recoup that cost," Johnson said Thursday.

Johnson, who was in California on business today, said he had wanted to appear before a congressional subcommittee looking at gasoline prices this morning at the Henderson Convention Center. The House Government Reform Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs heard testimony from gasoline industry leaders and other experts.

Johnson wanted to tell them that he and other small-business operators are having a real tough time.

"These fuel prices are just killing us," said Johnson, whose deliveries from Texas to Washington state put 16,000 miles a month on each of his tractor-trailers.

"We can't pass this (fuel) cost on to our customers. All we can do is weather the storm and hope things get better. But I don't see an end to these rising prices.

"I'd tell the subcommittee that everything in this nation depends on transportation and because of that we have to get some controls on this."

Subcommittee Chairman Doug Ose, R-Calif., said Thursday he does not believe there is a consensus about what is causing skyrocketing fuel prices.

"I think it is simply an increase in demand outstripping our ability to meet the need with an adequate supply of fuel," he said, noting he believes U.S. refineries must increase production.

"We have to either maintain our ability to refine at static levels or increase it," he said.

Reps. Jim Gibbons and Jon Porter, both R-Nev., were to join Ose on the dais during today's hearing, though they are not members of the subcommittee.

"The recent increase in gas prices run the risk of harming our tourism based economy here in Southern Nevada," Porter said in prepared remarks. "Roughly half of the visitors who arrive to our region come by automobile."

He and Gibbons called for a comprehensive national fuel policy, which the House of Representatives has passed three times but has never passed the Senate.

"It is time to allow for the responsible development of our own energy resources to meet our own energy needs," Gibbons said in prepared remarks. "Importing close to two-thirds of our energy does not put us in a position to bargain with the OPEC nations."

Tom Gallagher, a Democratic challenger to Porter, held a news conference outside the convention center before the hearing.

"The issue has been studied to death," he said. "Everyone knows what the problems are.

"We've had study after study, hearing after hearing. We don't need more hearings. We need action."

Gallagher was critical of Porter having accepted $81,300 in political contributions from major oil companies.

Prior to the hearing, Porter countered Gallagher's claim about needing more action, saying, "We need solutions -- there's been a lot of actions, but no solutions."

Porter said solutions include building more refineries and reducing the types of fuels refineries must produce.

Dick Burdette, energy adviser to Gov. Kenny Guinn, said the process that would lead to the investment in new refineries in California is flawed.

"When supply shortages occur and companies make more money than they would normally make, the excess profits are supposed to be used to invest in new refinery capacity," said Burdette, who was to testify today before the subcommittee.

"But what's happening here is the environmental laws do not allow for more refineries in California. Thus the ability to increase supply has gone away."

Ose also has suggested that instead of 38 blends of fuel being produced to address air-quality issues, four or five blends may be enough to keep the air clean and prevent slowdowns caused by refineries having to retool to switch the production of gasoline blends.

Burdette says, however, that federal environmental guidelines for attainment of clean air encourage so many custom blends.

"State implementation plans are done in a microcosm designed for a specific area," he said. "Each area figures out what is perfectly best for them."

The AAA gasoline survey has found that seasonal increases in gas prices can be traced to refineries switching to summer fuel blends.

This year that trend began early with significant increases in February, which generally is a time when fuel prices are stable, said Sean Comey of Nevada AAA, who was scheduled to testify today.

The average price per gallon of gasoline in Nevada for all blends has steadily remained third highest in the nation behind California and Hawaii. Nevada motorists currently are paying about a quarter more than the national average.

This week consumer prices nationally and in Las Vegas were at record levels. According to the AAA survey, the national average for regular today was $2.05 per gallon. In Nevada it was $2.30. Las Vegas' average was $2.28. Comey does not anticipate the tourist economy of Las Vegas will suffer in the short term.

"There is a pent-up demand for leisure," he said. "For a long weekend in Las Vegas, a person from Los Angeles would have to spend a few more dollars for gasoline. Will high fuel prices be a reason to cancel that trip? Not likely."