Gas prices have always factored into the cost estimates a Madison-based moving company gives customers before employees help move boxes and furniture to a new home.
But before 2020, gas prices were only a fleeting consideration for Busy B’s Moving, said office manager Andrea Cation. Now Busy B’s with a fleet of four moving trucks and 10 employees pays up to $4,000 a week for gas. The company was established in 2019, she said.
While the global energy sector has seen shocks before the pandemic and the recent war between Ukraine and Russia, companies like Busy B’s that rely on transportation to deliver services and ship products will likely have to navigate the next months uncertain, according to research information from the American Automobile Association (AAA).
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That’s because gas prices have skyrocketed — largely due to the war and the sanctions the United States and other countries have imposed on imports of Russian oil and other products. A barrel of oil costs between 105 and 110 dollars, according to the Nasdaq stock exchange. By comparison, the price of crude oil last year averaged about $71.
The cost of gas, affected by oil prices, will remain locally higher than normal for an indefinite period, according to AAA. In Madison this week, gas prices averaged $3.90 from $3.20 a month ago. Last year around this time the prices were around $2.62.
And businesses that use transportation have to pass those increases on to someone, said Moses Altesch, a lecturer in the marketing department at UW-Madison’s School of Business. Altesch is also president of Madison-based business consulting firm Moses Altesch Consulting.
For moving and bus transportation companies, service costs could rise for customers as companies struggle to keep bottom lines intact. Inflation only compounds this problem, he said.
“Trucks that transport products from manufacturing plants to retailers and wholesalers … incur additional costs,” said Altesch, who has written extensively on energy market news. “If the manufacturer can’t ship the product because the shipping company needs to be paid more…the store won’t sell the product. This raises prices across the board for a variety of products.
“As if that weren’t enough…remember everything plastic is made with petroleum products,” he said. “Anything involving plastic packaging…close your eyes and imagine everything from a bottle of Coke to a container of leftovers. All of those things are getting more expensive to make and even less to ship.
Altesch said it remains to be seen what might happen if high prices and other issues persist over the long term. For now, inflated costs in general are the norm. He pointed to how the Federal Reserve is looking to keep raising interest rates, as well as the low unemployment rate and the trend of more people saving their money as glimmers of hope.
“We’re in a good position to sustain that effect… It’s just that rapid inflation isn’t good for anyone,” he said. “It is difficult to predict the effect of wars and similar world events. It makes people nervous. Markets hate uncertainty.
behind the numbers
Influencing the numbers are “several different layers,” said Nick Jarmusz, director of public affairs for AAA’s The Auto Club, referring to past AAA research.
“What we saw when COVID first hit… Oil producers cut production because demand so far outpaced the early months of COVID,” he said. “Gasoline prices are at historic lows…under a dollar a gallon. The price of oil was down close to zero.
“As we navigated through the next two years of COVID and people started to come back to work, demand increased. That’s why we’ve seen these prices climb through 2021… Demand was returning in many areas to pre-pandemic levels.
When Russia invaded Ukraine, countries like the United States imposed an embargo on Russian oil, Jarmusz noted.
While the United States depends on only a small percentage of Russian oil imports, other countries use far more. And so the sanctions have always had a knock-on effect.
While fluctuations in the energy market appear to be stabilizing, “there is still a reflection of uncertainty in the oil market and concern about what could happen,” he said, adding that the COVID outbreak currently occurring in China could also have an impact in the years to come. weeks.
On Thursday, President Joe Biden announced the release of 180 million barrels of oil from the country’s strategic reserve over the next six months, or about 1 million barrels per day. That’s about 5% of what Americans use every day.
Lake Mills Cleaners and Dryers has served most of south-central Wisconsin for 70 years, including free clothing deliveries and pickups, said owners Lance and Ellie Tarnutzer, who took over the business in 2011.
The company has 24 employees and a fleet of five trucks, and intends to maintain its free delivery and pickup services, Ellie said, despite a 5% increase in expenses “due solely to gas prices “.
Two Men and a Truck, a nationwide moving company franchise based in Madison, has also felt some of the effects of high gas prices, said general manager Neal Stake. The Madison site has just over 50 employees, as well as up to 20 trucks during the busy summer season.
Stake said fuel costs for the business have increased by about 15%, but the company is trying to find ways to offset those for customers and employees.
“We try to do what we can to give our customers what they’ve come to expect from us for years,” Ellie said. “We hope to see something change. I hope things will start to improve.
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