Gas prices have gone up across the United States over the last year. According to the U.S. Energy Information Administration, national average fuel costs are approaching the highest level seen in almost ten years.
The reasons for the increase in the price of oil and fuel are reduced crude oil production because of the pandemic, gas shortages, supply disruptions, transport issues, an increase in driving and fuel demand, and more.
Small businesses with vehicles on the road every day – construction, maintenance, delivery, transportation – see the costs immediately and directly.
Even businesses that don’t directly use many vehicles feel the pinch. Every order shipped, every sales call, every trip to the office costs more.
Supply and Overhead Costs
Prolonged periods of spiking fuel prices raise the everyday costs of doing business, especially if a company has vendors and suppliers that must regularly transport goods or deliver services crucial to daily operations. For example, in 2012 testimony before a congressional committee, a Pennsylvania horse farm operator pointed to severe impacts from rising costs for the farm’s hay and feed suppliers.
Impact of fuel price increases on delivery and transportation businesses.
Needless to say, businesses that are focused — or highly reliant — on delivery and transportation are most heavily impacted by the increasing price of gas. This includes everything from Uber drivers to services that transport patients so they can get to medical appointments to contracting and construction companies.
Rising Gas Prices Lead to Increased Operational Costs
As fuel prices increase, it’s likely your business will have to absorb the added costs.
“Many companies will need to compensate for rising fuel costs by raising prices, especially if the increased gas prices continue,” says Hanna.
Increasing costs to the consumer will be necessary for Black.
“The margins in the trucking industry are too tight and competitive to take on the added fuel cost,” he says. “Increases must be passed along on the freight bill, which ultimately leads to the consumer paying more for products.”
Service Areas
Companies that are focused on delivery and transportation are heavily impacted by the price of gas. If they wish to save on fuel costs, they often must either trim their geographic target service regions, or find other ways to reduce costs in their existing service areas, by altering routes or driving practices.
Here are 4 ways that small businesses of different types can cope with the rising cost of gasoline and other fuels:
1. Restructure pricing or territories.
Some businesses are restricting the areas they serve, or charging more to go out of area. Others are raising minimum charges or putting tiered pricing in place to compensate for having to travel greater distances.
2. Leverage the Web.
Show customers how buying online and by mail order can save them money by not having to visit your location. Use Web-based collaboration sites to “meet” with clients, freelancers, partners and others rather than meeting in person.
3. New or old, maintain your vehicles
Underinflated tires, misalignment and dirty filters or oil can decrease fuel efficiency. Check vehicle’s manual to ensure they are maintaining it as recommended by the manufacturer.
4. There is power in numbers
With fuel prices dropping, there’s renewed talk of raising fuel taxes. Join additional small business forums to work with government representatives on keeping taxes and surcharges in check.
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