Anticipated Record Fuel Prices Have Industry Worried

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The Packer Mar 30, 2012

Summer peak usage is still months away, but fuel prices already are at all-time seasonal highs, which does not bode well for approaching peak shipments of mangoes and other produce items, according to petroleum industry analysts.

“In some instances, if some of these commercial carriers purchase fuel in a manner similar to airlines, they may have protected themselves with contracts bought a year ago or even longer than that,” said Gregg Laskoski, senior petroleum analyst with GasBuddy.com, which tracks fuel pricing trends across the U.S. and Canada.

Mangoes traveling by air, he pointed out, may have a bit more short-term protection, since airlines often buy fuel on contract well in advance.

“If trucking companies are paying for diesel at just the going rate and have no protection against that, it’s going to be tough for them to provide service without passing them on to their customers and, ultimately, the consumer,” Laskoski said.

For purchasers of mangoes and other produce items, that could bring some sticker shock, Laskoski said.

“Supermarkets work on such small margins to begin with, their business model is extremely sensitive to cost increases, whether it’s produce or fuel, and those costs will be passed along fairly,” he said.

As of March 14, the price for diesel fuel was averaging $4.117 per gallon, up from $3.930 a year earlier and $3.926 a month before but still well below the record of $4.845 established July 17, 2008, according to AAA.

In a report issued March 6, the U.S. Energy Information Administration projected that price of diesel fuel, barring any unforeseen circumstances, would reach $4.15 per gallon during the summer of 2012, compared to $3.84 in 2011 and $2.99 in 2010.

Whether the price record would be matched this year is a tough call, due to various factors, Laskoski noted.

“It’s very tough to predict, because that’s something influenced more by global demand than U.S. demand,” he said.

Global events, specifically rhetoric that continues to churn around Iran’s nuclear buildup and Israel’s potential response, compound the problem, Laskoski said.

“Everybody wants to know which direction these prices are going, and I keep telling folks we have to wait to see what happens in the Middle East,” he said. “Until we know whether there’s going to be a peaceful resolution, that’s going to shape all kinds of things.”

Should fuel reach new highs, it would affect all produce, several shippers said.

“I think everything will be impacted across the board and will be a little bit more expensive,” said Jesse Capote, owner of J&C Tropicals in Miami. “How it’s going to handled, I don’t know yet. I’m already starting to see some fuel surcharges.”

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