Fueling Change

If John Felmy had the ability to predict whether fuel prices would rise or fall, he’d own Maui, he says. But, after having 25 years of experience in energy and economic and environmental analysis, he will definitely provide some insight to participants on Thursday, Oct. 23 in Louisville, Ky., at the Green Industry & Equipment Expo – first at The Dealer Experience’s 1:30 to 2:45 p.m. luncheon and again from 5 to 6:30 p.m. during the Professional Landcare Network-sponsored Keynote Address.

Felmy, chief economist for the American Petroleum Institute, will speak about current economic conditions surrounding rising fuel prices.

And his advice comes just in time. Many landscape contractors and equipment dealers are fed up with rising fuel costs. In a recent Lawn & Landscape magazine survey, industry professionals gave high gas prices a 9.1 rating on a scale of one to 10 as being their biggest business challenge going into 2009.

CUTTING COSTS. Felmy’s studies began in college, where he attended Pennsylvania State University for his bachelor’s and master’s degrees in economics. Felmy continued with his education at the University of Maryland where he received a Ph.D. in economics. Both of these institutions rank in the best economics programs in the country, according to U.S. News & World Report. Felmy has been an energy consultant since 1980.

“This is a very important sector that touches on almost all Americans,” he says. “Everyone has to cut the grass and run the mower at some point.”

Since joining API about 10 years ago, Felmy has made sure people are aware of conservation efforts. His job revolves around the economic, statistical and policy analysis of API. With rising fuel prices and the recent economic downturn, the main objective Felmy is stressing is the education of drivers on fuel conservation through common sense practices.

Landscape contractors and manufacturers are feeling the current economic pinch and are searching for ways to cut costs while preventing profit loss. Contractors such as Dan Bishop, chief operating officer of D & K Landscape in Las Vegas, are cutting costs by reducing the amount of time workers have to drive.

“If we can plan ahead with our bigger jobs, our purchasing department can get everything dropped right to the curb,” Bishop says. “We can maximize labor and efficiency by not having our guys running around for material and burning up fuel.”

Keeping careful inventory of equipment by carrying what only will be used on the job is a way to save some gas, Felmy suggests. Implementing a fuel surcharge seems to be a viable way for some landscape companies to offset costs. Bill Smallwood of W.J. Smallwood Landscaping in Salem, N.H., operates within 25 percent of fuel costs. “If it goes over, then, yes, we do have a proportional fuel surcharge,” he says. “This year we hit a 3-percent fuel surcharge once gas hit $3.50 per gallon.”

Many factors have contributed to the rising cost of fuel, and Felmy will also address these in his speech. The price of a barrel of oil fluctuates rapidly based on conditions in other countries, he says. In the beginning of the year, conditions in Nigeria caused supply changes and shifted the price higher. The rapid urbanization of China and India has driven demand as well. Since gas grew to $4 per gallon in the U.S., people are discovering both old and new ways to conserve.

“Since prices peaked, we’ve seen growing indications of demand slowing down,” Felmy observes.

Weather conditions in the South aid in the increase of gas prices as well. Fuel demand grew during the summer season because it was warmer and more families went on vacation. High heating oil prices in the winter drive prices for diesel.

But, the biggest weather-related issue that could affect the future of gas is hurricanes, Felmy says. One large tropical storm or low category system could cause a shut down in the South, where many oil reserves are located. But Mother Nature is impossible to predict. “It’s a cloudy crystal ball,” he indicates.

While he plans to touch on all areas of energy conservation, such as coal, electric, nuclear and oil, one of the conservation methods Felmy plans to focus on is the use of biofuels. Even though biofuels are increasing supplies in the market, there may be some drawbacks. Ethanol is wearing away fiberglass tanks in boats, and how it may affect car gas tanks is questionable, he says. “I’m not familiar with long-term tests such as what it does to rubber components,” he admits, “but it can clearly add efficiency improvements in demand and it works in softening the markets.”

THE ELECTION & FUEL PRICES. As the 2008 election nears, alternative fuel sources and conservation have become topics of discussion that Felmy says are both helpful for the energy-saving community and ridiculous at the same time.

Speculation based on political candidates is only worsening the economic outlook, while bringing up energy resources is strengthening conservation efforts, he says. Felmy is going to speak about what Congress has done so far in terms of legislation and making the American public aware of the energy crisis and also what efforts the country can make as a whole to improve infrastructure and lower demand.

Candidates who are suggesting taxation of oil companies to reduce the strain on wallets is reminiscent of windfall taxes from the Jimmy Carter era, a repeat mistake that needs to be avoided, Felmy says. Because the landscape industry is so customer-oriented, becoming educated about conservation techniques will be the key to reducing demand. Felmy plans to make this one of the most important points in his speech.

Overall, the fundamental concept of supply and demand is to blame for fuel prices, he says. “I’ve been in this business for so long that just when you think things can happen they do,” he explains. “It is so tight in terms of supply and demand that all it takes is a small shift and you can have such a big movement in the market.”