As we head into the spring season when business picks up for the lawn care and landscaping industry, we’re being faced with another challenge: the price of a barrel of oil is skyrocketing, and gas prices are again headed to the $4-a-gallon range. We saw this happen in 2008, which led to consumers cutting back on spending, trying to scrimp and save just to pay to put gas in their car to drive back and forth to work. So, how will this affect the industry now as we are in the fragile steps of economic recovery? It’s hard to say. In July 2008, oil hit a whopping $147 a barrel, pushing the national average of gas to $4.11 a gallon. As I write this column, the price of oil is holding steady at $98 a barrel (yesterday it hit $103 a barrel), and the national average price of gas is $3.287, jumping 6 cents overnight and marking the third day in a row of a price raise. With the looming tensions in Libya, as well as other political unrest in North Africa and other regions of the Middle East, analysts believe the price will just keep rising.
So how is your business going to handle the extra expense? A lot of businesses on LawnSite.com are talking about adding a fuel surcharge to their clients’ bills, or are thinking of just raising their prices to account for a rise in expenditures. The talk of alternative fuels is also becoming a hot topic, as diesel and propane-powered equipment is becoming popular in the industry, and electric-powered tools are also being noticed. Most companies were just starting to see their companies get ahead after a couple of years of slow business, so there could not be a worse time for this to happen. It is estimated that for every $1 increase in the price of oil, retail gas prices typically rise 2.5 cents a gallon, costing consumers $1 billion over the course of a year. And, rising gas prices typically have a domino effect, since it raises the price of food and durable goods, which must use gas to be trucked around the country. And, with summer looming, which is typically when gas prices are highest, we can only expect that we’ll be paying a lot more to keep our cars on the road.
The good news, if there is any to this, is that when this happened in 2008, oil prices began to drop in August, and slowly tumbled to $37 a barrel by the end of December. We can only hope that history will repeat itself.
Amy K. Hill