High gasoline prices continue to impact the pool and spa industry.
Last month, the U.S. Department of Energy raised its forecast for 2011 gas prices to a national average of $3.56 a gallon — a whopping 77-cent increase over 2010’s nationwide average. The DOE has also said that gasoline prices may average $4 per gallon by this summer.
That estimate was revised upward in light of the political upheaval in oil-exporting countries, such as Libya. A number of other factors — including rising demand for oil in developing countries like China and India, and more aggressive speculation in oil futures on the commodities market — have also played roles in the recent price increase.
So far, some companies in the construction and service sectors have been trying to absorb higher gas costs — but industry insiders say that if prices keep rising, even those niches will soon have to adapt. “We may see the return of the fuel surcharge,” said Greg Howard, executive director of Carecraft Inc. in San Juan Capistrano, Calif. “You’re also likely to see a jump in the cost of a service call.”
In fact, service companies that have held off on raising their rates are finding it harder to ignore the effects of rising gas prices. “So far, what we’ve done is just bite the bullet and hang in for it,” said Curt Johnson, general manager of North Bay Water Service in Benecia, Calif. “But I’m starting to see increases in product prices.”
Farther up the supply chain, manufacturers have found themselves in a similar situation. While fighting to keep prices as low as possible, they’ve begun to feel the pinch in terms of freight costs. “If we hit $5 a gallon, [companies will] ultimately have to pass that on to the end user,” said Aaron Fick, corporate transportation manager at BioLab in Lawrenceville, Ga. “The industry can’t just continue to absorb it.”
Still, some business owners say absorption is the best strategy for the time being. Johnson said his company has held off on rate increases during previous oil price spikes, and reaped the benefit of customer loyalty in return. He’s been addressing the current situation by working closer than ever with one particular supplier. “That’s working out really well,” he said, “because we’re getting decent-sized deliveries. So now’s the time to build a better relationship with your supplier.”
In the long term, though, some think suppliers may find that the root of the problem lies much deeper than gasoline prices. “Gas is probably not quite as big a deal as what will happen over time to petroleum-based products,” Howard said. “High petroleum prices affect corrugated plastics in a huge way, and that will affect almost everything the industry makes, from covers to liners.”
Others, however, say high gas prices may ultimately have a mixed outcome for the industry. “If it takes $300 in gasoline just to take the family on a four-day vacation,” Fick said, “people are more likely to stay at some and use their pool more.”
Johnson has already noticed some of his customers taking an increased interest in their backyards. “I’m getting lots of calls that I normally don’t get this time of year,” he said. “A pool is a lot of money invested in the ground — and if you want to keep that investment secure, you have to spend money on it.”