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High fuel costs pinch transportation industries

For businesses that rely heavily on trucking or deliveries for their everyday operations, high fuel prices are inescapable.

Diesel prices have soared alongside prices for regular gasoline, prompting some businesses to impose fuel surcharges, or to increase existing fees. Other businesses are trying to avoid taking that step by conserving fuel.

Heading into the weekend, the AAA reported a gallon of diesel fuel in the region sold for an average of $3.06 a gallon, up 53 percent from a year ago. By comparison, regular gasoline averaged $3.19 per gallon, and was up 65 percent from a year ago.

Companies in the Buffalo area might feel the effects of the fuel price increases more than most places, since average diesel prices in New York state are among the nation's highest.

UPS, which operates a terminal in Buffalo, adds a 3 percent fuel surcharge to its ground shipments, and a 9.5 percent surcharge on its air and international shipments. UPS changes the figures once a month, based on U.S. Department of Energy data for diesel and jet fuel from two months earlier, said Susan Rosenberg, a UPS spokeswoman in Atlanta.

"We make it transparent to our customers," she said.

In 2004, UPS spent $1.4 billion on fuel for its planes and trucks. Halfway through 2005, it had spent $855 million -- and that was before prices soared in August.

"We hope that if fuel costs come down, then so, too, will the surcharge," Rosenberg said.

UPS tries to manage its truck fleet as efficiently as possible, down to plotting driver routes that require few left turns, so as to reduce fuel-wasting idling, she said.

The entire trucking industry is sensitive to fuel prices: the American Trucking Associations reports that for many carriers, fuel is their second-highest expense, after labor. And fuel can amount to 25 percent of operating expenses of many long-haul carriers, the ATA said.

Other industries also feel the pinch. Transportation surcharges have been added to some shipments of produce Wegmans receives from Florida and California, said Ann McCarthy, a Wegmans spokeswoman. It is possible similar costs are being added to shipments of some other products the supermarket chain receives, without being specifically identified, she said.

Wegmans was seeing an impact from higher fuel prices even before Hurricane Katrina struck; the storm exacerbated the situation, she said.

Try-It Distributing wants to avoid putting a fuel surcharge on its beverage deliveries and is working with its customers on that effort, said Robert Kolasa, executive vice president.

Try-It is sending a letter to its customers about a "conserve and preserve" program, explaining how the distributor will attempt to reduce its fuel expenses, Kolasa said. The ideas include encouraging customers to purchase more inventory to reduce the need for trips by Try-It's trucks, and managing its fleet effectively. The company will also solicit ideas from customers.

"We just don't feel it's the right time to sock the retailers or the consumers with an added fuel surcharge," he said.

Kolasa said the company is focusing on conservation as the solution. The company just paid $3.10 per gallon of diesel fuel for its last shipment, compared to $1.47 two years ago. For trucks that average six miles to the gallon, the increase hits hard financially, he said.

"It's placing a great deal of strain on us," he said.

Railroads are not immune to higher fuel prices: Norfolk Southern uses an average of 40 million gallons of diesel fuel per month to power its locomotives, said Rudy Husband, a Norfolk Southern spokesman.

"We're fortunate we're not paying the pump price," he said.

The fuel prices might be prompting some customers to switch from trucks to railroads to make their shipments, Husband said. "We haven't quantified it. But we have seen some traffic that normally would move over the highway."

Schwan's Home Service has a unique way to deal with fuel prices: the majority of its frozen food delivery trucks are powered by propane.

The price increases for propane have not been as high as those for gasoline or diesel, said Mike Gunderson, a spokesman for the Minnesota-based company.

"It is not as dramatic an effect on us, but we're still feeling the pinch," he said.

Schwan's conversion to propane vehicles dates to the late 1970s, when the United States was reeling from high gas prices, Gunderson said.

"The owner had the foresight to tackle the issue at that point," he said.

The company is still mindful of fuel conservation, by ensuring trucks are shut off during delivery stops, he said.

e-mail: mglynn@buffnews.com

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