Rising gas prices fuel other expenses

Cliff Thompson
Special to the Daily/Mark FoxDoug Smith of Parker smiles, almost in disbelief, after paying $2.96 a gallon to fill his car up at Shell in Aspen Tuesday, Mar 29,2005. Aspen Times photo/Mark Fox

EAGLE COUNTY – Want a quick lesson in how higher fuel prices quickly spread past the gas pump, through the economy and whack your wallet again?With gasoline prices in Eagle County edging ever-closer to and likely to exceed $2.50 a gallon, and diesel at $2.62 a gallon, there’s plenty enough pain at the pump to go around. Fuel prices nationally, averaging $2.11 a gallon for unleaded, have risen 21 percent in the last year. But the pain doesn’t stop there.Nearly everything you purchase – goods and services – reflect the increase. How much the price of each purchase is affected varies by how dependent the product is on fuel prices. There are other levels of pain at the pump, too, that won’t be felt until tax bills are due. Consider the cost of running a school bus system like Eagle County’s. The district’s 51 diesel buses haul 3,400 students daily, and travel 620,000 miles per year, said Melanie McMichael, the district’s transportation director. That’s about 100,000 gallons of diesel a year.Fuel price increases are being felt in her department, which will be seeking an additional $20,000 to cover the skyrocketing cost of fuel. “Our budget can’t accommodate it,” McMichael said. “It’s one of our biggest problems. When gas prices go up so does everything else.”That everything else includes parts for buses, which McMichael said, are mandatory. “You have to keep buses safe,” she said. “You can’t cut out parts.”

Bacon to beansFuel and other cost increases forced Eagle County’s ECO bus system to hike its fares earlier this year, said director Harry Taylor.One-way fares in-county increased in January by a dollar to $3 and prices for the skier shuttle between Beaver Creek and Vail were hiked from $3 to $5, Taylor said. Somewhat curiously, more expensive fuel so far hasn’t translated into more bus riders, Taylor said. While the number of riders using the county’s bus system have increased this year, Taylor said he attributes the increase not to people deciding to leave the gas-guzzlers at home, but to more skiers hitting the slopes and an overall growth of the market. He said it will be easier to determine that once the ski season ends.It’s not just transportation-dependent companies that are feeling a pinch, it’s across the board. Name a business and you’ll find prices are being pushed by the cost of oil.At Howard Tuthill’s Columbine Market in Gypsum the increased expense to his store is reflected in the price of everything from T-bones to tortillas.”It’s noticeable,” said Tuthill. “It’s like the price of everything else that keeps going up.”

Tuthill said his suppliers, like many others across the economy, have tacked on an “energy surcharge” he estimates hikes the price of orders 2 percent to 4 percent. But with inflation remaining low -2 percent to 3 percent – Tuthill said rising fuel prices haven’t has a large an impact as have past inflation rates over the eight years he has operated his store. ‘Negative shock’But there are some hidden costs to consumers that will have likely have a larger effect on the wallet than fueling up the car. “There’s indirect usage of oil that’s more subtle,” said Jim Markusen, an economics professor of the University of Colorado. “Petrochemicals are used for plastic and other items,” he said. “It spreads through every business in the economy.”He called this use “intermediate inputs” to business. Because the United States imports more oil than it produces, it creates an imbalance. That imbalance is exacerbated by the declining buying power of the dollar.

“If the price of something we’re selling goes up, that’s good,” Markusen said. “If the price of something we have to buy from the rest of the world, goes up, that’s bad.”Inflation – a rise in the cost of everything, coupled with decreased purchasing power – is likely to be fueled by the increase in oil prices, said Markusen”This has to be absorbed by the economy and it’s a negative shock” he said.That means everything from the cost of your home mortgage to what you pay for car repairs may increase. Last week the cost to banks of borrowing money as set by the Federal Reserve Board was hiked one-quarter of one percent in an attempt to cool of inflationary pressure.Staff Writer Cliff Thompson can be reached at 949-0555, ext. 450, or cthompson@vaildaily.comVail, Colorado

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