Stop Rising Gas Prices from Killing Small Businesses03/05/12
By Sam Graves
Our nation’s economy is at a fragile turning point in its recovery. Job creation, consumer spending and production data are slowly starting to show signs of improvement. But we are still far from the strong economy our nation is accustomed to.
Federal Reserve Chairman Ben Bernanke conveyed this sentiment Wednesday when he testified before the House Financial Services Committee. Bernanke said that unless growth accelerates, the unacceptably high U.S. unemployment rate will not keep dropping. “The job market is far from normal,” Bernanke said. “Continued improvement … is likely to require stronger growth in final demand and production.”
One of the biggest threats now to our recovery is gas prices, which have consistently increased over several weeks. The nationwide average jumped to roughly $3.76 a gallon, according to the motorist group AAA. It was $3.46 a gallon only a month ago.
This presents a significant burden for small businesses, already struggling to make payroll, deal with regulations and figure out how to comply with the health care law. Energy is a major cost for a substantial share of small businesses, according to the National Federation of Independent Business. One in 10, or 10 percent, of small-business owners claim that energy is their single biggest cost — greater than wages and salaries, materials and supplies. A further 25 percent say energy is their second- or third-largest business cost.
A Small Business Administration study showed that compared with larger businesses, small companies face a 30 percent price differential for electricity and a 20 percent price differential for natural gas. The median commercial sector industry has a small-business energy cost per sales ratio that is 2.7 times greater than that of larger businesses, hindering their ability to compete during times of high energy prices.
Numerous small-business owners tell our committee, on our interactive website, Small Biz Open Mic, that rising gas prices are hurting them. They’re frustrated that Washington won’t do more to address the issue.
“After surviving my first five years of business,” said Barry Somerville, owner of Glass Lawn Management and Landscaping in Hendersonville, Tenn., “there is no relief in sight for my two small-business headaches: cost of gas and lack of cash flow. I do not understand why the high cost of gas is not a higher priority.”
Michael Gray, owner of Gray & Associates in Springfield, Mo., expressed the same sentiment. “The high cost of gasoline, natural gas, liquefied petroleum gas and petrochemicals,” Gray said, “is sucking any money consumers and small business have that could help stimulate the economy from the bottom up. What can Congress do to lower the high cost of energy, which drives up the cost of everything manufactured and transported, to help save our economy?”
So, what’s the solution? We must aggressively, and safely, increase our nation’s domestic energy production. While some Washington bureaucrats believe the only answer lies in a peaceful solution to Middle East unrest, the fact is we could address this here by using our own resources. Relying on events and politics in foreign nations is not, and should not be, our preferred solution.
U.S. energy resources, including recoverable oil, natural gas and coal resources, according to the nonpartisan Congressional Research Service, are the largest in the world — outranking Saudi Arabia, China and Iran.
“The impact that these price spikes have on the small-business trucker is devastating,” Dick Pingel, the operator of Finally Trucking in Wisconsin, said during a hearing last year, “halting investment and potentially forcing drivers to default on the loans that finance their trucks.”
Though the administration has claimed that 75 percent of our offshore “resources” are open, this is misleading. The U.S. Outer Continental Shelf is measured in acres, and of the 1.76 billion acres, only 38 million — 2.16 percent — are actually leased for energy development.
In 2007, the U.S. Energy Information Administration projected total 2010 U.S. oil production on federal lands to be 850 million barrels. Last year’s actual production on federal lands was 714 million barrels, 16 percent less. This is unacceptable.
I work hard to make sure Congress knows what I am hearing from the small-business community. Our Subcommittee on Investigations, Oversight and Regulations will hold a hearing this Thursday on how government regulations and leasing policies are limiting small energy producers and contributing to our overall rising energy costs.
U.S. small businesses want lower fuel prices now. It is up to Washington to put aside political pandering to special interests and open up safe exploration and development to our domestic energy resources. If we don’t, small businesses will suffer, and our recovery will be delayed.
Rep. Sam Graves (R-Mo.) is the chairman of the Small Business Committee.