Americans are more concerned with the price and
availability of hydrocarbon energy petroleum and natural gas than
at any time since the oil shocks of the 1970s. This summer’s
unprecedented hike in the cost of oil and gasoline was driven
higher by the destructive arrival of hurricanes Katrina and Rita in
September, both of which damaged the country’s vital oil-producing
infrastructure in the Gulf of Mexico.
Throughout the U.S. economy, higher energy prices are driving
up the cost of living and doing business. On Aug. 30, the price of
crude oil reached an all-time high of $69.91 per barrel, according
to the U.S. Energy Information Agency. For all of 2005, the average
price per barrel of crude oil will be about $60, up from $20 per
barrel in 2001.
Within the meetings industry, suppliers are feeling the pinch.
“Our gas, laundry costs and other production expenses have gone
up,” says Jeff Duglin of Oldsmar, Fla.-based Duglin Linen,
providers of specialty linen and chair covers to event planners.
“We’ve passed along a fuel surcharge to our customers. While they
don’t like it, it’s a small percentage of our real costs.”
Such charges are becoming more familiar to meeting planners.
“We have definitely encountered energy surcharges again,” says Kay
Granath, CMP, director of meetings and conventions for the
Association Management Center, based in Glenview, Ill. “As a
homeowner who sees how expensive it’s becoming just to operate one
household, I can only assume the fees are going to go up.”
Like many of her peers, Deborah Krant, conference director for
the nonprofit National Center for Employee Ownership in Oakland,
Calif., has yet to see fuel prices hurt attendance or meeting
budgets. However, she adds, “I don’t know if that means we won’t
see that in the future.”
Chances are, we will, says Gregg Talley, CAE, chairman of the
board of the Professional Convention Management Association and
president of Mt. Royal, N.J.-based Talley Management. “I think
we’re just starting to see that energy costs are a danger going
forward,” he says. “Surcharges, higher ticket prices and costs at
the pump impact decisions about travel. And increases in energy
costs will cause people to question attending meetings.”
Just how much might energy prices rise? Will the airlines
survive? Are fuel surcharges here to stay? M&C went to the
experts for insights and advice.
The meetings industry is dependent on transportation
suppliers to function. Airlines, shipping companies, motor coaches,
vans, shuttles and limos move attendees and goods to planners’
events and are key to their success.
Among transporters, commercial airlines are perhaps the most
sensitive to rising energy costs and 2005 was not a good year.
Carriers have gone bankrupt, merged, reorganized, cut capacity and
routes, and reconfigured pricing structures. Of the six legacy
airlines, three are bankrupt, typically citing the cost of fuel as
the root of their financial troubles.
“Today’s jet fuel prices are crushing and could prove the
knockout blow for some,” says John Heimlich, vice president and
chief economist of the Air Transport Association, a trade group
representing U.S. airlines. “Thanks to the high price of crude as
well as a range of issues with refining capacity, product
distribution and market speculation, jet fuel prices have soared.
And keep in mind, unlike other modes of transport, airlines have no
alternative to jet fuel.”