Low Gas Prices Aren’t Causing Windfalls

Lately, contractors have been seeing fuel prices dip lower than they have been in months. This came as a relief to many who are hoping they will pick up more business as they drop surcharges. Yet there are others who didn’t add a charge in the first place.

But the chatter on the Lawn & Landscape message board suggests most contractors are staying alert skeptical that the prices will stay low for very long.

Landscape contractor Nick Auxer has been adding a fuel surcharge to clients’ bills as long as gas has been more than $2.50 per gallon.

“I had one commercial account tell me that they would no longer pay a fuel surcharge if put on any of my invoices,” he says. “Wouldn’t you know, that’s when gas went down to $2.19 here in Tulsa. So there’s no need to surcharge, at least this month anyway.”

Contractor Gary Batho added surcharges as well, but starting this month, is dropping the extra charge.

Chad Stern of Mowing & More in Chevy Chase, Md. and contractor Bill Smallwood don’t add the extra charge, but they keep their options open.

“I have them in my contract, which allows me to recoup if gas doubles over the price at the time of the contract,” he says. “Other than that, I don’t feel it’s worth alienating clients over.”

If contractors price their work to allow about a 25 to 30 percent profit margin, they wouldn’t need to worry about fuel surcharges, Smallwood adds. He also says he doesn’t buy a high enough volume to receive a windfall when prices are lower than what he budgeted for.

Jamie Bush of JLS, Inc. in Plano, Texas, isn’t seeing a surplus either.

“I based my 2006 prices on about $2.50 per gallon,” he says. “Any savings on lower months will offset the cost of higher months.”

Sal Mortilla of Landscaping Unlimited in Farmingville, N.Y., finds his prices remaining steady because he planned ahead.

“Common sense dictated that at some point in time the cost of fuel would escalate,” he says. “I realized that five years ago and have been compensating with my price structure over that period. Even if gas hit the $5 mark, our profit margin would remain unchanged.”

He doesn’t see gas prices getting that high any time soon. In fact, he predicts more of a decrease by mid winter or sooner.