Brent lives in Albuquerque New Mexico and will spend $18,000 on gasoline alone this year. Every month, he’s spending $1200 on fuel for the truck and van he has for his two-person air conditioning repair business. More on that in a minute.
Another $300 a month goes into the family car, a newish GMC Acadia, which his wife uses to drive to work and to ferry their kids to school and baseball games. In the ten months they’ve owned the family car, they’ve put 15, 659 miles on it. “It’s an extension of our home, “ Brent explains. When we talked by phone, he was tending to the concession stand at a little league game. “We’re just a typical nuclear family. We rock and roll all day long-- 8-12 hours--then come home to the kids and little league. That’s all we do.”
While gasoline lubricates Brent’s family life, it’s turned into a sticking point with his business. Because of the recession, Brent has laid off 12 employees since 2006. He’s now down to himself and one other employee, and he has just two vehicles: A GMC Sierra with a large engine so he can haul heavy equipment, and a 2500 Savana cargo van covered with ladders and other gear. Gas now makes up his third largest business expense, right behind labor and private and state insurances. The run up in gas prices has cut directly into Brent’s bottom line, so that where he used to bid jobs with a 10-15 percent profit margin, he’s now down to a 3-5 percent margin. “Gas prices hurt because I have to pay them but I can’t raise prices. At the same time our equipment charges are more because of freight and when I rent equipment--say I hire a crane--I have to pay fuel service charges that have increase by 10 percent. Our profit margins have fallen and it makes it harder. I’ve stopped buying new equipment that I would have replaced before.” The stress of the cicyle of rising expenses and increasingly competitive and low bids means that he can’t really even think of hiring more workers.
Brent is not alone in seeing gas prices as a barrier to hiring more workers. A recent poll by the Small Business and Entrepreneurs Council found that 41 percent of small business owners in their poll said gas prices had caused them to raise prices. 26 percent said gas prices had caused them to layoff workers or reduce hours. And 47 percent said the prices were preventing them from hiring. Finding a way to help small businesses out of the energy trap--helping them spend less on gas--is an essential part of the economic recovery and building a sturdy economy for a future of volatile prices.
I asked Brent what he thought would reduce his expenses, and he quickly said he’d like to be able to buy work-grade vehicles that get much higher gas mileage. His truck gets around 11 mpg and his van gets 8-12 mpg. He’d like a powerful truck with better gas mileage. “ I’d like something with lower torque, not necessarily where we’re going zipideedodah.” The cargo van, which loses efficiency becauses of the equipment hanging off of it, also starts and stops a lot as it goes to jobs. That’s a vehicle that would be well-suited to the kind of hybrid engine the Prius has, where the brakes regenerate power that is used to save fuel when starting the vehicle from a stop. Right now the auto companies are mostly focussed on creating higher end passenger vehicles, but small businesses like Brent’s need sturdy vehicles. What’s more, business fleet vehicles, like pickup trucks, actually drive nearly three times the distance a household vehicle drives in a year. Targeting these vehicles will result in larger savings of money and gas than improving the household vehicles.
But until there’s a better truck or van, Brent figures he’s stuck. “If gas rises to $5 a gallon I just have to bow down to the pump” (and pay it), he says. “They’ve got us by the gonads. This is how we get around-- and that’s the bottom line.”