According to the Energy Information Administration (EIA), the average price for a gallon of gasoline this month will be $2.35. That's an increase of 37 cents from over a year ago, and up 6 cents from mid-April. And as pump prices have been gradually climbing over the past few months, remodelers have been forced to implement some changes.
Mark Scott says he's been getting a lot of complaints from his field crew about how expensive it's getting to come to work. “It's taking money out of their pockets to come and do their job,” says Scott, president of Mark IV Builders, in Bethesda, Md., where, at press time, prices were as high as $2.40 a gallon. If Scott's carpenters fill up three times a week, that's over $100 per week. Scott is planning to reimburse his employees for their fuel expenses.
Trouble On All Sides The problem is that fuel money wasn't built into the budget for this year, and neither was the rate increase Scott is seeing from his trade contractors, which is often listed as a “fuel surcharge” on the contract. That leaves clients to foot the bill for the “extra” money, something they aren't particularly eager to do — especially because the prices of many materials have risen dramatically in the past year, driving price tags for remodeling projects higher.
Indeed, remodelers have been feeling the crunch of higher petroleum prices for some time now, in the form of more costly materials. Dominic Rice, a vice president of product management for Armstrong, a hard surface flooring manufacturer headquartered in Lancaster, Pa., says that his company has implemented a series of price increases in the past 12 months on its vinyl sheet flooring. Rice, who declined to give specific numbers, says that the increases reflect rising costs to Armstrong of raw materials (petroleum and natural gas) and freight.
What's Ahead An April article in the Boston Globe said that if Americans continue to consume gasoline during the summer at the rate they're going now, they will have spent about $40 billion more on gasoline than in a typical year, obviously resulting in that much less discretionary income. While $40 billion is nothing to sneeze at, it actually represents less than 1% of all consumer spending — which means it's unlikely to affect remodeling activity. “People don't undertake remodeling projects on a whim, or based on how many dollars they have in their pocket,” says Kermit Baker, senior research fellow at the Joint Center for Housing Studies at Harvard University and director of its Remodeling Futures program. So while consumers may cut down on the frequency of their visits to movie theaters and restaurants, they aren't going to cancel plans for a kitchen remodel or a room addition just because they're spending an extra ten bucks every time they fill up.
In fact, a residual effect of higher petroleum prices — increased heating costs — may even be a boon to business, at least in some markets. Michael Sullivan, of siding and window replacement company Lifetime Aluminum, East Hanover, N.J., says that while energy efficiency isn't necessarily the driving force behind the decision to buy new windows, it is often the “final straw. They've been thinking about it anyway, and the energy costs just push them over the edge.”
Sullivan has also noticed that customers are savvier than they used to be about energy efficiency. “They're paying more attention than they did last year,” he says. “I had one client tell me, ‘My heating bill was $650 in January, and I don't ever want to see that number again.'” Sullivan uses pamphlets from the Department of Energy as part of his sales presentation. “It's making my job a little bit easier,” he says, “because I'm promoting an energy-saving product.”
