Inflation, Gas Prices and Contractors in Construction and Drilling

How are those fuel prices hitting your bottom line? I warn you upfront: This column offers perspective and a few tips, but solutions rise high above my pay grade.

First, that perspective I promised. It’s not just you. Prices for the petroleum products that fuel our planes, trains and automobiles have gone up significantly. Whether you want to run a 5-horespower generator, an extended cab pickup or a $1-million drill rig, it costs more today than it did this time last year. How much more? Glad you asked.

Helpfully, the U.S. Energy Information Administration (EIA) tracks this information and has for years. On March 8, 2022, the average pump price for diesel in the United States hit $4.85, up more than 54% from the same time a year ago. In the same period, the average pump price for regular unleaded climbed to $4.20, an almost 47% increase. In both cases, we’ve seen much of that increase since the start of this year.

Needless to say, a 50-some-percent increase in the cost of anything hurts. We all feel the burn on fuel prices. We can drive less — and the conservation approach may work for a retiree on a fixed income. But what about a company that depends on fuel inputs to generate production outputs? You can’t cut fuel use if it means you can’t get to the job or finish it once there.

As Joe Consumer, lately I wince at the pump when I fill my little Toyota truck. Filling the tank of a full-sized pickup would, I think, give me actual physical pain. I don’t even want to think of the sticker shock of filling a big commercial vehicle like a mid-sized drill rig or a semi-tractor.

So, what to do? As I said, solutions to this one rise way above my pay grade. Uncertainty does, well, uncertain things to markets. That includes commodities like oil. Here are some mitigation ideas:

• Cut back elsewhere. OK, so cutting back on coffees for the crews and turning the office thermostat down won’t make up for hundreds, perhaps thousands, more spent each month on fuel. But it’s something.
• Raise prices. Smaller, per-job contractors can immediately build in fuel surcharges or other price increases to help offset. Others doing work on longer-term projects can check contract fine print. It may account for sudden spikes in costs — though may not. If not, hang on and build it into the next bid.
• Call your representatives. I don’t expect politics can’t solve this year’s world crisis in the near term. But it can help alleviate the pain. Here in Michigan, there’s talk about suspending the gas tax for the summer. Maybe other ideas can help. But prodding your representatives (state and federal) about it can also prove cathartic.

Like I said: no solutions, only tips. But know that we’re all facing it together. Keep your head about you. Cut where you can. This crisis too shall pass.

What do you think? As a contractor, where have you found to cut? Have you been able to change your price structure? Let us know. Send an email to verduscoj@bnpmedia.com.

Stay safe out there, drillers.