[Fair Use: For Education and Research Only] High Gas Prices Could Have Ripple Effect on Economy 3.43 p.m. ET (2043 GMT) March 13, 2000 By Michael Y. Park

NEW YORK  The price of gasoline may be decided in the richly appointed meeting chambers of OPEC, but its effect is felt in the cabs of cabbage-hauling big rigs, in the cockpits of commuter airlines and in the pocket of the average consumer.

And what a difference 12 cents makes.

In Springdale, Ark., Sue Colvin, the owner of Sioux Transportation, said that the cost of fueling up her fleet of gas guzzlers, 22 18-wheelers that haul produce from coast to coast, has nearly doubled from mere months ago. Each fill-up used to run about $200. Now her truckers have to fork out at least $350 at the tank.

For Colvin's small trucking operation, the hike in gasoline prices means that instead of paying $800,000 annually for gas as she did last year, she's looking forward to a $1.3 million fuel bill at the end of 2000.

"I'm very, very worried about it, because, like all small businesses, I'm struggling right now," Colvin said. "You have to pay for four things: pay for fuel, pay your driver, insurance and truck payments. Right now, you can maybe pay three of those. I hate to think I've put 20 years into this company to see it go down the drain  for diesel fuel."

And it won't stop there, according to economics professor and transportation expert William Shughart, of the University of Mississippi in Oxford, Miss. Because gas figures into the cost of nearly every item or service Americans buy  whether as a petroleum product or part of the delivery cost  a long-term price hike could have significant consequences for the American economy.

"There aren't many things that won't be affected," Shughart said. "It's a part of everyone's budget, and the increase in gasoline that we've already seen will have a noticeable impact on people's behavior. People will change their vacation plans, instead of taking long drives they'll stay at home, maybe some people will switch over to public transportation as a way to get back and forth to work. If it continues for a long time, plastic will go up. And a lot of medicines are derived from petroleum."

Officials from Procter & Gamble Co. said that part of the reason the company stock took a nosedive last Monday from $87.43 a share to $53.37 a share is because the company expects to earn less than expected in the next quarter in part because prices are rising for the petroleum-based materials it needs for manufacturing. Other similar consumer-product companies like Colgate-Palmolive and Kimberly-Clark fared slightly better, but still suffered.

But it's already had a devastating short-term effect on the people like Colvin, who haul medicines from New Jersey to Texas, and on the small airlines that take plastics executives on their short jaunts from Los Angeles to Berkeley, Calif.

Kim Champney, president of Big Sky Airlines in Billings, Mt., said the commuter airline has been forced to consider a price increase, potentially a fatal move for a relatively small operation with paper-thin profit margins and one that depends on cheap fares to attract business. Fuel costs have gone up about 25 percent since mid-November, he said, meaning that overall expenses for the company have gone up a crucial 3 percent.

"Something will have to give," he said. "Either we will have to keep increasing fares, which means we'll face losing traffic which in turn means we can't gain revenue, or we keep losing money for fuel. It's a self-defeating process. I wish we could find some sanity to it."

Small trucking concerns are already considering bankruptcy, according to Rick Rattazzi, vice president of the Fresno, Calif.,-based Johanson Transportation trucking brokerage.

"It's going to force the guys who are marginal out of business," he said. "The people who are conservative will probably be able stand it, but they'll have to dig into their savings. It's pretty rough in the trucking business right now."

Big companies like Ford Motor Co., FedEx Corp. and Continental Airlines have already passed along the new costs to their customers, company officials said recently. Ford slapped on an extra $25 fee for delivery of vehicles, FedEx increased its 3 percent surcharge to 4 percent and Continental raised fares by $40 for round trips. But small operators like Big Sky and Sioux don't have that option.

Colvin said the price increase has essentially run some local truckers off the road.

"Some brought their trucks home and just parked them and said to the financing companies, 'If you want to come get 'em, get 'em," she said. "It's a no-win situation. The government's going to have to come in and do something for us."

And what they might have to do, Colvin said, was eliminate limits to the amount truckers could charge for hauling certain items, like produce. That would mean the cost would be passed on to grocery shoppers. "Pretty soon when we have to park our trucks like that, grocery trucks are going to have to pay more, which means when you and I go to the grocery store, we're going to have to pay more."

Shughart said it might not be all that grim for the average consumer, however.

"As far as having a inflationary impact on the economy, this is only one price," he said. "Cost is only one component of price and firms will only be able to pass through some of the increase in the price of gasoline  when they raise their prices, people buy less of their product. So some of the bite comes of the pockets of consumer, but also the profits of firms."

And there's always the hope that OPEC and Mexico will raise production. Energy Secretary Bill Richardson on Sunday told Fox News that he expected OPEC to do so at its March 27 meeting.

Until then, Colvin said, Americans will have to deal with everything that comes with more expensive gas, including one unusual change on the highways that she noticed while on a cross-country trip last week.

"Truckers always say they go 100 miles an hour, but they usually go about 70 miles an hour," she said. "Well, I looked out the window and I said, 'You know, no one's passing us.' Everyone was going 55, 60, 65. Everyone's conserving fuel."

http://www.foxnews.com/national/031300/gas_park.sml

-- Martin Thompson (mthom1927@aol.com), March 13, 2000