Drop in gas prices unlikely to drive spending for transportation businesses

NJBIZ STAFF//April 2, 2013//

Drop in gas prices unlikely to drive spending for transportation businesses

NJBIZ STAFF//April 2, 2013//

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While gas prices have continued to drop, it’s not a trend that will produce significant savings for transportation-heavy businesses that rely on diesel fuel, according to a corporate relocation executive.AAA reports regular gas prices in New Jersey closed the final week of March averaging $3.48 a gallon, down from $3.51 the prior week and $3.71 a year ago, but the diesel average remains above $4 on highways across the East Coast.

Gary Grund, vice president of national sales for Budd Van Lines, in the Somerset section of Franklin, said diesel prices would need to decline to about $3.50 a gallon before such companies could comfortably spend on new hires and equipment.

“Not when it’s still above $4 a gallon,” Grund said. “Our trucks are getting five miles per gallon. It’s still a significant impact. And even though prices are going down in New Jersey, our drivers are all across the country.”

The nationwide retail average for regular gas is $3.64, according to AAA, compared with $3.92 at this time last year. Grund said the downward trend helps somewhat, since diesel and retail prices tend to move in the same direction.

Budd Van Lines specializes in corporate moves, employing about 185 in its New Jersey headquarters and drivers across the country. Grund said profit margins for the industry, often below 10 percent, are too slim to withstand exorbitant fuel costs.

“It does impact our ability to bring on new workers,” he said. “We can’t invest in new, green equipment.”

That’s not to say the recent decline is not welcome.

Tony Baumer, owner of BD Movers, in Manahawkin, said the drop in fuel helps offset rising insurance and labor costs.

“Where we feel the most relief is in our long-distance hauling,” Baumer said in an e-mail. “A few cents either way really adds up when you’re traveling 1,200 miles to Florida or 2,800 miles to Los Angeles.”

Patrick DeHaan, senior petroleum analyst at Gasbuddy.com, a website that collects gas prices from stations across the country, said businesses and consumers will notice relief if trends continues.

“For a typical driver, it’s a few bucks a week — but multiply that across all businesses, and you’re looking at big savings,” DeHann said.

DeHann said there could be a spike of 10 cents to 20 cents a gallon before Memorial Day, followed by another decline in June. But DeHann cautioned against long-term projections because of unknowable global events.

Markets now are benefiting from stability at refineries, he said. Fires and other mishaps were disrupting production at this time last year.

“No news is good news,” DeHann said. “This year seems to be pretty peaceful. That has allowed prices to ease.”

AAA tentatively predicts gas prices will remain lower in 2013 compared with the past two springs.

“While prices at the pump have declined throughout most of March, it is still too soon to say whether retail prices have peaked for the spring because there is still refinery maintenance to be completed, and much of the country has yet to transition to (more expensive) summer blend gasoline,” Tracy Noble, manager of public and government affairs for AAA Mid-Atlantic, said in a statement. “However, with the national average falling further below the year-ago price, AAA continues to predict that the national average will crest lower than recent years.”

The national average for regular unleaded peaked at $3.94 last year and $3.98 in 2011, according to AAA.