Consumers feel crunch for jumps at the pump

Higher jet fuel costs are already restraining airline earnings. For instance, Goldman Sachs analyst Robert Barry recently cut his fourth quarter earnings estimates for Delta Air Lines Inc. from 29 cents to 6 cents due to rising fuel costs. Spot jet fuel prices at New York Harbor rose to $2.42 a gallon this week, up from $1.80 a gallon a year ago, according to the EIA.

Airlines manage rising fuel costs in part by bumping up prices, said Philip Baggaley, an analyst at Standard & Poor’s. But prices can only rise so far before they hurt demand.

Diesel prices are averaging about $3.04 a gallon, 54 cents higher than a year ago, and the American Trucking Association estimates the industry’s total bill will jump $5 billion this year to $108 billion.

Trucking companies such as Yellow Transportation and Roadway Express, units of YRC Worldwide Inc., and package delivery firms such as United Parcel Service Inc. are able to pass on at least a portion of those higher costs to customers through fuel surcharges. But that’s not an option for independent operators like Thomas DelBello, whose tab for each fill up of his dump truck has soared to $400.

DelBello says it’s difficult for him to pass on the higher cost because many of the people he’s driving for already have contracts — fuel prices included — with their own customers.

“It’s hard to get any of it back,” said DelBello, who lives 15 miles south of Houston. “These days, it’s the cost of doing business.”

Ultimately, higher costs trickle down to the consumer, though Bob Costello, chief economist for the ATA, said it’s not easy to quantify how much. “You and I are eventually going to see something at the store,” he said. “How much, there’s no way for me to say.”

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Oil’s rise has been impressive. In 2003, New York Mercantile Exchange oil futures averaged $31.08 a barrel. The march higher in the following four years by almost $60 a barrel has increased the U.S. economy’s total energy expense by an additional $250 billion a year, said Lester Lave, a professor of economics at Carnegie Mellon University’s Tepper School of Business. “That’s a lot of money.”

On Friday, light, sweet crude fell 87 cents to settle at $88.60 on the Nymex. Oil futures rose $4.91 last week.

Unlike earlier oil shocks, the latest price spike has not sent the economy into a recession. In part, that’s because it has been gradual. Previous price shocks occurred over the course of weeks or months, not years. But it’s also because fuel efficiency has risen and personal incomes have outpaced the increases in energy costs, analysts say.

In 1981, Lave said, 14 percent to 15 percent of the nation’s gross domestic product was spent on energy. That’s fallen to 7 percent today.

But the alarming pace of oil’s most recent rally suggests prices paid by Americans could quickly rise to a level that hurts the economy.

Said Lave: “There’s some price where you have to say, ’OK, I give in.’ "

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