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BUSINESS
David Manning

Businesses reap windfall from cheaper gasoline

Paul Davidson
USA TODAY
truck companies and couriers are among the biggest beneficiaries of falling fuel prices.I(AP Photo/Paul Sancya)

Many businesses are boosting hiring and investments with the money they're saving on fuel as slumping oil prices bolster a resurgent U.S. economy.

Airlines, freight haulers, repair services, farmers and manufacturers are among businesses that could save billions of dollars a year from tumbling fuel costs.

Goldman Sachs estimates that fuel cost savings invested by businesses and governments will boost economic growth by 0.1 to 0.2 percentage points over the next year to a projected 3%.

Airlines are perhaps the biggest winners. Jet fuel prices have fallen to $2.46 from $2.88 a gallon since June. Every penny decline in the price of jet fuel reduces the industry's costs by about $190 million a year, according to the trade group Airlines for America. Airlines are not expected to pass the savings to passengers through lower fares.

United Parcel Service does pass its savings on diesel fuel for its trucks to customers through a lower fuel surcharge. But the decline lags the diesel price drop by two months, preserving millions of dollars in revenue. The opposite occurs when fuel prices are rising as UPS first absorbs higher costs before raising surcharges. Since March, diesel prices have fallen about 10% to $3.60 a gallon.

The extra cash is typically more meaningful for small and midsize businesses, which are likely to spend it. "It's a big deal," says Jack Mozloom, spokesman for the National Federation of Independent Business.

David Manning, president of TCW of Nashville, says the freight hauler saved $300,000 in diesel costs for its 265 trucks in October compared to March. Although the firm trimmed its fuel surcharge, the fee is not levied on all customers and there's a lag before it's passed along. Manning says he's spending the windfall on bigger raises amid a truck driver shortage.

Guardian Services, which repairs commercial kitchen exhaust systems in the Dallas area, paid less than $2,000 in gasoline costs for its 12 vans last month, vs. $4,600 in June, says owner Brett Muller. He plans to use his $10,000 in total savings on bigger holiday bonuses for his 18 technicians.

"I'm competing against construction companies" for workers, Muller says.

Others are hiring more. Silver State Couriers, of Reno, will likely bring on another driver now that it's paying $5,000 a month less to fuel its 25 delivery vehicles, says owner Eugene Hoover.

Manufacturer Brooklyn Bicycle Co. will likely add a marketing specialist to the 21-employee business after saving $10,000 a month in shipping costs this fall, says owner Ryan Zagata. The company pays the freight for any retailer ordering more than 10 bikes per shipment.

If fuel prices stay low, Zagata expects to save another $4,500 a month next year on costs to ship the bikes from Chinese factories to U.S. warehouses — money that would be invested in more staffing or advertising.

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