Gas Prices Put The Brakes On Economic Recovery?

Feb 27, 2012

Transcript

MICHEL MARTIN, HOST:

I'm Michel Martin, and this is TELL ME MORE from NPR News.

Coming up, voters in the West African nation of Senegal took to the polls yesterday. But for the past month, election-related protests there have turned violent, something that has shocked this country with a tradition of peaceful and Democratic elections. We'll check in with NPR's Ofeibea Quist-Arcton for a report on what is behind the violence and how the voting actually proceeded over the weekend. That conversation is coming up.

But we wanted to start the program today talking about something that is on a lot of people's minds here in the U.S. - that is the price of gas. Americans are paying an average of $3.69 for a gallon of regular gas. That is the highest price that's recorded for this time of year since the group AAA has been keeping track. AAA spokesperson Lon Anderson told us this.

As you might imagine, rising gas prices are hitting Americans hard in the wallet, sparking a lot of finger pointing on the campaign trail and fears that the economy that has been inching toward a recovery could be further weakened.

We wanted to know more about what is behind the increase and how it is actually affecting the economy, so we've called upon NPR senior business editor Marilyn Geewax. Marilyn, thanks so much for joining us once again.

MARILYN GEEWAX, BYLINE: Hi.

MARTIN: We also wanted to talk more about how the surge at the pump is affecting people, so we called Andra Rush. She is the chairman and CEO of Rush Trucking, which is based in Wayne, Michigan. Andra, thank you so much for joining us.

ANDRA RUSH: Thank you for having me.

MARTIN: Marilyn, we'll start with you. And, of course, we want to know how these gas prices are affecting the economy or if they're affecting the economy. But we want to start with why are gas prices going up in the first place?

GEEWAX: Well, Michel, let me just step back for one second to look at the big picture. Overall, economists expected energy prices will continue to rise in general because people are getting richer in India, in Asia and Latin America. As that demand increases, so will the price of energy.

But that's not what's happening right now. This is a very specific spike, and we've seen prices really shoot up in January and February that's very much tied to this confrontation between Iran and Israel and the West. People are worried that this channel that oh, is off the coast of Iran, the Strait of Hormuz, could be mined. It could be - there could be military action there that would block off supplies. And that concern is driving prices higher as people speculate they want to buy oil, hoard it and be prepared if there is some kind of a problem.

Now, that's very frustrating for our political leaders because there's very little you can do. You can't really change economic or energy policy to deal with this very short-term spike.

MARTIN: But one thing that political leaders do feel they have to do is feel your pain. And the president did that this weekend. He talked about this when he was in Florida last week. Let me just play a short clip of what he said.

(SOUNDBITE OF SPEECH)

PRESIDENT BARACK OBAMA: When gas prices go up, it hurts everybody - everybody who owns a car, everybody who owns a business. It means you've got to stretch a paycheck even further. It means you've got to find even more room in a budget that was already really tight. And some folks have no choice but to drive a long way to work, and high gas prices are like a tax straight out of your paycheck.

MARTIN: Well, talk about people who have to drive a long way to work. What about people for whom driving is their work? So that brings me to Andra Rush. You've been in business since 1984. And as I understand it, you have a combination of full-time employees and independent contractors. How has this gas price spike affected you?

RUSH: Ah, yes. Well, actually we buy a tremendous amount of diesel. And so, diesel actually affects us more, but gas affects us in a way that our employees commute a lot to work, our dispatch and non-driving employees. And so, therefore, they have a sensitivity to any movement that drives fuel above $3.50.

In our diesel business, however, we have fuel surcharges that help us continue to provide the services with our customers. The challenge is as fuel continues to go higher, that fuel surcharge is coming from somewhere. So, it's coming from our customers' profits. And ultimately, they will pass it on to the consumer. And if the prices continue to increase, then you're going to see and a slow down, in my opinion.

MARTIN: Marilyn, you wrote a piece for NPR.org titled, "Warm Winters: Helping Consumers Cope." So, we've talked a lot about the fact that gas prices are rising, but you're saying that that's actually been offset for some people. Obviously, that wouldn't affect Andra, you know, because it's - but tell us more about that. OK.

GEEWAX: Well, this is really the phrase so far should be underscored here, because so far it hasn't - really these hikes in gasoline prices - haven't derailed our recovery. And that's because consumers have a little bit more money in their pockets because of this warm winter. You know, I checked with some government statistics. And three years ago, the average price for the heating season, what people paid for natural gas, was $888 for the season.

This year, they're estimating it will be $643. That's a lot of money to be down for your natural gas prices, and electricity is a little cheaper too because of this warm winter. And then now, remember, we've also had this payroll tax holiday that's put about $20 per paycheck - per week in each paycheck.

So, if you take together the lower payroll taxes that people are putting out and the reduced amount they're spending on their heating bills actually over December, January, February, if you added it all up, the typical person has maybe $500 more in the piggybank. And that helps with these gas prices. So, again, back to that phrase, so far it hasn't hurt that much.

MARTIN: So, gas prices are eye catching. But if you really look at your own bottom line, then...

GEEWAX: The money is still there.

MARTIN: ...the money is still there.

GEEWAX: So far.

MARTIN: So far. If you're just joining us, we're talking about rising gas prices and their impact on the broader economy. We're talking with NPR senior business editor Marilyn Geewax. That's who was speaking just now. Also with us is Andra Rush. She's the CEO of Rush Trucking.

But I want to talk about you're saying so far, Marilyn. So, let me just play a clip of Texas Senator Kay Bailey Hutchison. She delivered the Republican weekly address over the weekend, and this is what she had to say about gas prices.

(SOUNDBITE OF SPEECH)

SENATOR KAY BAILEY HUTCHISON: Last February, the average cost of a gallon of unleaded was $3.17 per gallon, the highest February price ever. But this February's average is $3.57 per gallon, and all forecasts are for prices to rocket above $4.00 per gallon during the summer driving season. Families and businesses will be devastated.

MARTIN: Is that true? I'll ask each of you this. And, Marilyn, I'll start with you. Is $4.00 a gallon a tipping point?

GEEWAX: It is. You know, there's - psychologically, you have those gas signs in your face everyday all the time. You're driving to work, you can see the numbers going up. But people don't freak out that much when it goes from $3.50 to $3.60. But when you look at that sign and all of a sudden you're seeing fours up there across the board, then it really starts to make you think: Geez, we're not going to be able to go on vacation this summer. You really begin to ratchet back the thinking about the future. So, I think that anything over $4.00 a gallon really does have a lot of impact.

MARTIN: Andra, what about you? Does $4.00 a gallon, is that something of a tipping point like you were saying, for example, fuel surcharges when you start to - can you up the surcharge when it gets to that level or do people just balk and say forget it?

RUSH: We up the fuel surcharges for sure. But ultimately, the fuel surcharge doesn't cover all of your fuel expenditures. So, you keep eroding into your profit and your bottom line and there becomes a point where it's just not economically smart to continue driving if you're not able to get the commensurate rate increases. And when we see fuel go up dramatically, even though our surcharges have typically went for monthly surcharges retroactive to since early '08 it's been weekly and that's been a tremendous help for the commercial transportation industry.

But, again, you're right. In terms of gasoline when it's over $4.00 a mile. Almost everybody is talking about it, even your kids, our young kids are talking about it. And I joke around with some of our people that now we're creating logistics experts because before, they might run to Wal-Mart and then they might run to the cleaners and then they might go to Staples or something or to the show. And now, they're planning out their route very meticulously and doing it all so they use the least amount of gasoline to accomplish their normal tasks.

MARTIN: Andra, do you mind if I mention - Marilyn, just one second. Andra, do you mind if I mention - you're not just a - you're a woman-owned business, but you're also Native American. You're also a minority-owned business and I just wonder, do you feel a little extra pressure there as a role model to kind of figure out how to keep this company going in a challenging environment?

I'm imagining that, you know, a lot of people have eyes on you because you are in a field that's a little unusual for women to be in, if you don't mind my saying.

RUSH: Yes. It is unique, but more and more women are joining the field, so it's great to see. Humbly, yes, I am a role model and our success, though, is really garnered around the people around us, and also having great relationships with our customers. So we've been fortunate in that event, but truly, every time the economy takes a dip, we're all challenged to make sure that we can not only survive that dip but come out on the other side stronger and leaner. And it's a challenge, for sure.

MARTIN: I would imagine so. Final question for you, Marilyn, and a final thought from you. And I also did want to mention that there is growing pressure for the president to tap into the strategic petroleum reserve. I just wanted to ask - what are some of the politics of that and any final thought that you have.

GEEWAX: Yes. I just wanted to say that, for all small businesses, rising fuel prices are a real problem, especially if you're tied to the food industry. There's a lot of oil input into food prices, so if you own a little restaurant, if you have a grocery store, anything that brings food to your store and your customers, if it costs more to deliver it, it's going to be a problem for you. So that's really worrisome.

Now, on this issue of the strategic petroleum reserve, the government keeps quite a bit of oil on the side in case of an emergency. If we suddenly had a cut-off of our supply of oil.

Now, whenever prices start to rise too much, presidents tend to dip into that a bit. After Hurricane Katrina, for example, when oil refining got disrupted because of the storm, President Bush released some of that oil to help drive down the price of gasoline and now there is political pressure on the Obama administration to do likewise. Some Democrats are calling on him to start to sell some of that oil and there is evidence that that increase in supply of oil will help drive down prices.

But it's a tough thing to make a decision like that because, you know, the oil is held there for the case of emergencies and you don't want to use it lightly.

MARTIN: All right. We will keep an eye on this and, hopefully, you'll help us keep an eye on this. Marilyn Geewax, NPR's senior business editor, here with us once again in our Washington, D.C. studios. Always good of you to stop by, Marilyn. Thank you.

GEEWAX: It's a pleasure to be here.

MARTIN: Also with us, Andra Rush, chairman and CEO of Rush Trucking. And she was kind enough to join us from member station WDET in Detroit. Andra, hope to hear from you again, as well. Thank you so much.

RUSH: Thank you. You have a great day.

(SOUNDBITE OF MUSIC)

MARTIN: Just ahead, what does it mean to be cool? And, yes, we'll go there. Are black people just naturally cool, or do they have to work at it? A new collection of essays ponders this provocative question. It's called "Black Cool: One Thousand Streams of Blackness." We'll hear from two writers who made contributions to the book next. Until then, stay cool and stay with us on TELL ME MORE from NPR News. I'm Michel Martin. Transcript provided by NPR, Copyright National Public Radio.