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Rising fuel prices putting everyone in a bind

Industry News

Small business owners continue to face tough decisions on raising prices to offset fuel costs.

Associated Press | February 28, 2011

High fuel prices are putting the squeeze on drivers just as they are starting to feel better about the economy. They also are forcing tough choices on small-business owners, who are loath to charge more for fear of losing cost-conscious customers.

Gasoline prices rose 4 percent last week to a national average of $3.29 per gallon. That's the highest level to date for this time of year, when prices are typically low. And with unrest in the Middle East and North Africa pushing the cost of crude oil into the $100-a-barrel range, analysts say pump prices probably are headed higher.

Bryon Gongaware, an owner of the Floral Trunk and Gifts in White Bear Lake, Minn., didn't raise his $7 flower delivery charge when gas prices spiked in 2008, and he doesn't plan to do so this time, either.

"I don't think the economy is solid enough that you can be careless about raising prices," he said.

That means the extra costs that come from driving the store's delivery van 70,000 miles a year come from only one place: "Right out of the bottom line," he said.

For drivers such as Robert Wagner, 51, a high school teacher from Thornton, Colo., the higher fuel prices mean cutting back on movies and dinners out for him, his wife and their two children. "We're very, very frugal right now," he said as he trickled enough $3.09-per-gallon gasoline into his Chevrolet Suburban to get him to his next pay day.

Analysts and economists worry that by lowering profits for businesses and reducing disposable income for drivers, high gasoline prices could slow the recovering economy.

For a year, analysts estimate, oil at $100 a barrel would reduce U.S. economic growth by 0.2 or 0.3 of a percentage point. Rather than grow an estimated 3.7 percent this year, the economy would expand 3.4 percent or 3.5 percent. That probably would mean less hiring and higher unemployment.

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