The bills haven’t gone up for most of Rafael Garcia’s customers, and he’s paying the price.
The gardener shells out $450 for fuel each month, which is $250 more than it was costing him last year to fill up his lawnmower, weed trimmer and 1989 Ford F-150 pickup truck.
“It’s awful,” Garcia said as he picked up huge palm fronds that had fallen on the forest green lawn at a Beverly Hills home. He asked his customers to give him an extra $25 a week. Two offered $10, the Inglewood resident said, and the rest declined to pay anything additional.
“You explain the gas is expensive, but they say they can’t give you more money.”
Higher energy costs are causing financial distress across the economy. But for the smallest businesses and independent contractors -- such as the people who mow lawns or deliver pizzas or travel across town to translate court proceedings -- the pain is particularly sharp because they have trouble demanding more to cover the bigger tab.
Pump prices remain in record territory even as the price of crude oil has slipped in the last two weeks. California’s average for self-serve regular gasoline Friday reached a fresh high of $2.643 a gallon, up from $2.312 a month ago, according to an AAA survey. The national average Friday was $2.251 a gallon, 2.5 cents below Monday’s record but 20 cents higher than a month ago.
Certainly, more expensive oil and gasoline have squeezed profits at many large corporations.
Automakers have warned about lower first-quarter earnings as interest in gas-guzzling sport utility vehicles has waned. Airlines and big delivery companies have raised fares or added fuel surcharges. Things made from oil, such as plastics, also have become more expensive; that was why El Segundo-based Mattel Inc. raised prices on some toys 2% to 4% in January.
But boosting prices often isn’t possible for small businesses, which fear losing customers, or independent contractors, who often pay for fuel out of their own pockets. And with profit margins thinner, they look for ways to earn more or spend less. This kind of spending diet has been showing up in recent reports of softening retail spending and consumer confidence, economists have said, adding to the list of symptoms of slowing growth in the U.S. economy.
"[Small]-business owners, independent contractors and the self-employed are competing in a cutthroat business,” said Michael Shaw, an assistant director of the California branch of the National Federation of Independent Business. “They don’t have the ability to go in and demand certain conditions.”
Luis Martinez, for example, is paid 75 cents for every Domino’s pizza delivery he makes in the San Fernando Valley, on top of his hourly minimum wage. And the delivery compensation hasn’t changed, he said, which is a problem because of the hills his 1995 Toyota Tercel must climb -- and the gas that uses up -- to make some deliveries.
“We work for tips because the price of gas is so high,” said the 33-year-old Rosemead resident, who spends $23 three times a week to fill up, compared with $14 a year ago. “It’s very bad.”
Martinez, his wife and three kids have cut back on weekend outings and purchases of clothes and shoes. Trips to McDonald’s are out of the budget. “Now we stay home,” Martinez said.
Some business owners hope that fuel prices will ease so they won’t have to pay their drivers more. Relief at the pump could be on the way if crude oil continues to slide. The price of oil is down 12% from its April 1 record high of $57.27 a barrel on the New York futures market.
“Our customers are already getting hit at the pump, so why hit them twice?” said Kevin Jonas, a manager at Conroy’s Flowers in the Miracle Mile district of Los Angeles. The florist charges $10 for a delivery, a price that last changed a year ago.
“If you start charge, charge, charging, you’re going to lose a lot of customers,” Jonas said.
For now, the rising cost of fuel is being absorbed by the shop’s two full-time drivers. They received a raise this year, Jonas said, but since then fuel prices have shot up, costing each driver $50 more every week.
If fuel prices continue to increase, Jonas said, the flower shop probably will pay the drivers more but won’t pass that cost on to customers.
“There is a struggle to be able to compensate our drivers justly so they can make a living wage,” while keeping the shop’s delivery prices competitive, he said.
Others say they have no choice but to raise prices. At Burbank Plumbing Service & Repair, fuel costs for the company’s 10 1-ton service trucks have doubled over the last 18 months, forcing managers to raise the hourly rate that customers pay to $79.50 from $75, office manager Dan Pouliot said.
Not helping is the rising cost of metal products.
“Copper pipe, cast iron pipe, faucets, flush valves -- they’ve all gone up in the last year and a half,” Pouliot said.
But raising prices is a difficult call. Pouliot said he expected more of his customers to shop around among his competitors. And there are many longtime customers who find a $20 or $25 jump in a service call difficult to pay, Pouliot said.
“We’re walking a thin line where we can’t price ourselves out of the ballpark, but we have to be at a certain level to cover our costs and make a certain level of profit,” Pouliot said.
Julia Lambertini Andreotti, a Spanish interpreter, has begun rejecting jobs that require her to travel more than an hour from her Studio City apartment because she doesn’t get reimbursed for gasoline expenses.
“I stay closer to home now because traveling is not worth it,” she said.
Lambertini Andreotti, 44, says she takes side jobs to make up for lost income, including proctoring exams for interpreters and teaching her craft.
Jose Martinez, a 39-year-old gardener from Culver City, figures he’s shelling out $60 a week for gas, up from $40 a year ago. To cover that additional cost, he asked customers to pay an extra dollar or so. Most refused.
“Everything is going up, and our payments have stayed the same for years,” he said while planting red, white and violet petunias in the front yard of a Bel-Air home. “The customers don’t want to pay more.”
To cope, Martinez has parked his gas-slurping 1981 Chevrolet truck and is driving a somewhat more fuel-efficient 1992 Ford Ranger. And at the homes where he was turned down, Martinez said, he was finishing “quicker than I used to.”
Rising plastic costs are an added burden for Tom Lucas, the owner of Redondo Beach-based Performance Nursery, which grows trees and shrubs for landscaping. Every month, Lucas’ nurseries buy tens of thousands of plastic pots, and must fuel 60 tractors and trucks that make deliveries as far away as San Diego and San Francisco.
Fuel and plastic “costs have gone up 25%, and our plants are still selling for the same price,” Lucas said. He said he worried that if fuel prices continued to climb, fewer people would take leisurely weekend drives and stop by his two nurseries and growing yards in Ventura County.
Lucas said he had postponed buying new computers and trucks, and probably would plant fewer trees and shrubs next year. That could hurt future income for the 85-employee company, which has annual sales of about $5 million. He has even resorted to offering a $10 weekly bonus to drivers who find the cheapest gas station.
“I’ve been pinching pennies, but dollars are coming out of my pockets,” Lucas said. “I’m just bleeding to death.”