May 18, 2008

FUEL COSTS spread beyond the pump!

The current economic status is greatly effected by Fuel Costs, way beyond the price you pay at the pump! Consumers believe that the current slow economic market allows them to receive products & services at cheaper prices, but in fact, the cost of materials, expediting, & labor is rising! Fuel costs sneak in the price by shipping costs! Even companies that will hold their profit margins the same, will have added expenses that will creep in on the overall price to consumers. Fuel costs are affecting labor rates, as good employees demand a small increase in wage to offset fuel expenses. Fuel costs have been the reason you pay more at the grocery store. One of the obvious reason is shipping costs related to getting produce to market, but the unprecedented push to get alternative fuel sources, such as ethanol, has drained the corn supply. This in turn drives up most of the prices on our favorite foods.

Contractors are greatly affected by Fuel Costs due to shipping costs. Most raw materials have a significant cost for shipping costs that is worked in. When your 2X4 studs are shipped in from Georgia or Oregon, the shipping cost is a high percentage of the overall cost. Stone ,rock, gravel, and sand, even mined locally, can include a large percentage of shipping costs. I often tell my clients that boulders, found and produced for free, are more expensive than manufactured Modular Retaining Wall blocks, due strictly to the shipping costs! Companies such as UNILOCK ( North Americas largest producer of brick pavers), prices all its products off a weight factor. This weight factor is translated into raw material & shipping costs. Each and every product line they produce is converted into a weight ratio for pricing. Colors & Texture costs are then added to this base weight ratio to set the final wholesale price to contractors.

The next time your knees get weak as you pump enough gas in your vehicle to pay a scalper for Super Bowl tickets, remember this the not the last place your wallet will get squeezed. Remember you will have to buy a program, hot dogs, beer, and a T-shirt. This may be the last meal & clothes you will be able to afford!