For Many Businesses, Falling Fuel Prices Warm Their Profits

Dec. 23—Tom Meredith monitors the ups and downs of diesel-fuel prices very carefully.

As president and CEO of Conestoga Tours, Meredith projects its future fuel costs as he sets the prices of its bus trips months in advance.

Most years, he's figuring the Lancaster-based firm will spend more for fuel.

But now, with prices for diesel fuel and other oil products declining sharply over the past six months, he's budgeting less.

That will help offset upturns in Conestoga Tours' other top expenses – payroll, workman's compensation and liability insurance.

"It's a nice Christmas present for bus companies," said Meredith.

"Our normal rate increase is 3 to 4 percent. But next year, it might be only 1 or 2 percent. And in many cases, our rates will be the same."

That's welcome news in "a very price-sensitive business" with many competitors, he said.

Consumers aren't the only ones benefiting when crude oil prices tumble.

Declining crude oil prices are a welcome trend for most business executives, too.

"It's huge," said Doug Buch, director of operations for H.R. Ewell, an over-the-road trucking firm based in East Earl.

Crude oil prices this month sank to a five-year low, dropping nearly 50 percent since June, depressed by ample supplies and modest growth in demand.

That's pulled the prices of crude oil products such as gasoline, fuel oil and diesel fuel in the same direction.

For instance, the average retail price of gasoline in Lancaster County has slid to $2.57 a gallon, the website GasBuddy.com reported Monday.

That's a decline of 10.2 cents in the past week, 31.8 cents in the past month and 81.9 cents in the past year, said GasBuddy.

"Generally, any reduction in energy costs is good news," said Christopher Drew, vice president of strategy for Burnham Holdings.

Lancaster-based Burnham uses trucking firms to ship boilers, furnaces and other products nationwide.

Shipping costs less when diesel prices drop.

A second, more surprising benefit is the impact on sales.

When fuel oil prices decline, Burnham's residential products become more attractive to consumers.

The decline, explained Drew, means "more parity between fuel oil, natural gas and propane. That creates opportunities for our residential products."

At H.R. Ewell, fuel is the trucking firm's second biggest expense, trailing wages and benefits, according to Buch.

So fluctuations in fuel prices carry clout.

When the move is upward, a fuel surcharge that Ewell levies on customers partially offsets the impact.

And when the swing is downward? "It's obviously reflected on the bottom line. It's makes us more profitable," said Buch.

The business of farming benefits when oil prices descend, too, said Leon Ressler, district director of Penn State Extension.

The extension service advises and educates farmers, and does research, on a host of issues.

"Especially in spring and fall, during planting and harvesting, the fuel demand is pretty high," said Ressler. "So (lower fuel prices are) a big benefit back to the farm."

One company that's not celebrating ebbing oil prices is Turkey Hill Dairy, the Conestoga-based producer of milk, ice cream and iced tea.

"Low fuel costs aren't providing much relief for us," said Andrea Nikolaus.

"It's not our busy season right now. And other commodities throughout the year, like cream, have been at their highest prices in years."

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