Chicago: Fuel costs `devastating'

March 19, 2000

BY ROBERT MANOR BUSINESS REPORTER

Sharply higher oil costs are set to cascade through the economy, driving up the price of everything that's delivered by truck.

The trucking industry, along with airlines and other businesses powered by gasoline and diesel, is especially vulnerable to increases in the price of fuel--and those costs are up by 50 percent over a year ago.

"Right now, it is devastating," said Fred Serpe, executive director of the Illinois Transportation Association, which represents the trucking industry. "We are looking at companies ready to close their doors."

Serpe said that when fuel prices spiked in 1994, 200 of the state's 14,000 trucking companies went out of business.

The numbers behind fuel prices are simple.

Serpe said that a year ago, a gallon of diesel cost 99 cents in Illinois. Last week, it cost $1.52, an increase of 53 percent.

The trucking industry employs one out of every 11 workers in the state--counting mechanics, warehouse workers, drivers and others--and the effects of high fuel costs could eventually affect everyone unless there is a break soon, Serpe maintained.

"People are going to see this in grocery stores and drug chains almost immediately," Serpe said. He said that unless fuel prices break immediately, grocery costs will begin rising in May or perhaps sooner.

In his weekly radio address Saturday, President Clinton said there isn't a short-term fix and that consumers must be patient.

"There's no overnight solution," he said, announcing a series of modest proposals. They include creating a 2 million-barrel heating oil reserve for the Northeast, tax incentives for energy conservation and the use of alternative fuels, and modest tax breaks to support domestic oil production.

He said the administration will wait until OPEC's March 27 meeting to decide whether to draw some of the nearly 570 million barrels of oil in the nation's Strategic Petroleum Reserve.

The bulk of the nation's freight travels by truck, and eventually the higher costs will be tacked on to practically every item.

Charles Russell, vice president of Freight All Kinds, an interstate produce trucking firm with offices in Hinsdale, said he is adding a fuel surcharge to his customers' bills to offset part of the cost of higher fuel.

But Russell said his company, like others, is absorbing some of the increase rather than passing it on to customers.

"Everybody is eating it a little bit to keep customers happy," Russell said.

He also offered a prediction on the cost of fresh produce: "Lettuce at $2 a head." It now sells for about $1.30 a head.

Diesel and gasoline prices are up around the industrialized world. Chicago has an additional problem when it comes to products from the West Coast, however.

Trucks picking up cargo in California must buy fuel in that state. But California has the highest diesel prices in the nation, and some truckers are refusing to drive in the state.

When the trucking industry suffers, the rest of the economy suffers, too.

For example, Peterbilt Motors Co. is reducing its output from 70 big rigs a day to 50 because truckers don't have the money to buy new equipment.

The company said it may lay off some of its 1,700 workers in a few weeks.

Federal Express is adding a fuel fee for some domestic and international deliveries.

Higher gasoline prices already are affecting the nation's economy. Consumer prices rose 0.5 percent in February, the biggest jump in 10 months. Fuel prices could come down, of course. The price of petroleum dictates the cost of diesel and gasoline, and that price has rocketed and collapsed throughout the 20th century.

Truckers took their grievances to Washington on Thursday in an attempt to pressure the Clinton administration to help them with fuel costs. They are hoping Congress temporarily will lift diesel fuel taxes.

Chicago-based United Airlines is hoping for mercy on fuel costs.

Jet fuel prices have soared since late last year. United estimates it will spend $540 million on fuel during the first 90 days of this year, compared with $396 million for the same period a year ago.

And some of that increase is passed on to passengers. Like other airlines, United has added a $20 round-trip fuel surcharge for some flights and reportedly raised other fares by as much as $40.

Delta Air Lines Inc. and AMR Corp.'s American Airlines also added a $20 fuel surcharge and fare increases to offset higher fuel costs.

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-- Carl Jenkins (Somewherepress@aol.com), March 19, 2000