With a fleet of 1,500 vehicles, Minneapolis' Public Works Department has 1,498 more reasons than the average family to scratch for every possible savings in gas consumption. The city, like every other, can't help but drive constantly to fulfill its basic duties -- from policing neighborhoods to hauling trash to patching miles of spring potholes.
Minnesota businesses are struggling with similar inevitabilities. Take Pequot Tool and Manufacturing in Jenkins. High commodity prices are inflating the cost of materials and the cost to transport them, President Mark Shervey said. Even though steel to him is up from 45 to 70 cents a pound since January, he's still selling manufactured steel components on customer contracts he costed-out at the old price.
While households are struggling with record-high energy costs a dozen eggs and one SUV at a time, government and industry are taking industrial- size inflationary hits. At cash registers, in back offices and municipal garages, and on factory floors, the public and private sectors are trying to cover the spread between their old balance sheets and new ones pocked with fuel surcharges and pass-through price hikes on petroleum-based supplies.
Global oil prices have surged 40.5 percent from Jan. 1 through Friday, when West Texas crude closed at $134.86 per barrel.
Cities are instituting new "anti-idling" policies, so many police officers now will turn off their cruisers before stepping out to write a speeding ticket. And some are buying alternative-fuel cars and trucks as fast as they can. Businesses are consolidating deliveries -- or charging customers for them. Some have increased their advertising, to tug customers into their shops. Others are helping employees arrange carpools.
"Everybody is feeling the pain," said Brian Bethune, U.S. financial economist at Massachusetts-based Global Insight. "The only good thing about this is it's collective pain, and we can all complain."
Your tax dollars on the road
At Minneapolis Public Works, which maintains the cars and trucks of most city agencies, there are 194 "flex-fuel" vehicles that can run on every gas-ethanol blend on the market, with another 45 due by the end of summer, fleet officials said. Add about 300 vehicles that burn biodiesel, and that's more than one-third of the fleet.
The city is also contracting with HourCar of St. Paul, a car-sharing company, to keep two cars in parking ramps near Minneapolis City Hall. Fleet director David Babcock hopes that that will cover the occasional car needs of some employees, so the city can own fewer cars. Minneapolis' biggest cost savings this year won't come through conservation, though, but a contract that locks in a total of nearly 2 million gallons of gasoline for $2.77 a gallon and $3.15 for biodiesel. Babcock figures the city will save, conservatively, $1.3 million. The city also installed its own E85 pump at its Currie Avenue garage, so it can buy its gas-ethanol blends at wholesale rates.
Other cities are trying other ideas. In Anoka for the first time, City Hall employees can opt to work four 10-hour days through the summer, saving one day's commute, City Manager Tim Cruikshank said. In Andover, as gas prices grow so goes the grass, as the city changes its mowing cycles to save gas, said City Administrator Jim Dickinson. St. Paul police are realizing some savings through the use of bike, foot and horse patrols downtown, spokesman Peter Panos said.
About all the State Patrol can do is keep its cars in top shape and ask employees to carpool to meetings, said Lt. Mark Peterson, public information officer.
"Our job is driving," Peterson said. "What we need to do involves being on the road."
Getting people moving
For area stores, the challenge is coaxing consumers to burn a little gas and go shopping. At the Mall of America, officials have launched its most aggressive promotional campaign o persuade shoppers from the Dakotas to Chicago and Kansas City that the Twin Cities still offers good bang for the buck.
"We've never used this angle, and we've never done [a campaign] this intensely," mall spokesman Dan Jasper said.
For employers, one challenge is getting people to their workplaces. Bloomington-based Toro is introducing a ride-share database among its employees, spokesman Branden Happel said. In Maplewood, 3M has a "van pool" service that lets neighboring workers car pool. "The van is owned by the company and one designated employee gets to keep it overnight," said spokeswoman Jackie Berry.
Particularly hard hit are Minnesotans whose business keeps them on the road. Talk at a recent Minnesota Association of Realtors board meeting was about how to show properties with a minimum of "windshield time," said Greg Bauman, a principal and founder of Realty Executives Twin Cities. And Katy Gorman, owner of Generations, a Twin Cities mental-health agency, said her reward to home-visiting staff who get a good client review is a $50 gas card. "I never thought I would see a day when gas is such an incentive," Gorman said.
Biggest budget gouge
At many businesses, the biggest budget gouge comes in the costs of transporting goods in and out. At Pequot Manufacturing, Shervey said, some vendors' fuel surcharges add 5 percent to the total bill. Fuel charges of up to $35 prompted Ron Sonnek, president of Home Works Remodeling and Design Solutions in Maple Grove, to change his ways. Instead of his old "just-in-time" supply calls, Sonnek now puts in full, upfront orders and stores the materials on site, he said. And Gander Mountain, the St. Paul-based outdoor retailer, is consolidating delivery schedules and loads at its main distribution center in Lebanon, Ind., said Ron Reitmeier director of store operations.
Northwest Airlines, maybe more than any Minnesota company, has felt the squeeze between rising energy prices and a marketplace unwilling -- until recently -- to pass them along to customers. Jet fuel is 42 percent of the airline's operating expenses, costing it $1.1 billion in the first quarter of the year. One way the carrier has coped is replacing old planes with more fuel-efficient models, including the new Airbus A330, which consumes 13,000 fewer gallons than the old DC-10s round trip between the Twin Cities and Amsterdam.
On a smaller scale, Fabcon, a producer of precast walls based in Savage, is also saving money by using less energy. It has plumped up the insulation in parts of its plant and it is enclosing open spaces elsewhere, said Jim Houtman, vice president of sales and marketing. Fabcon also installed a propane system to cut natural gas consumption in peak demand seasons. And energy savings is a growing preoccupation in building management. Gittleman Management Corp., the Bloomington-based manager of 220 townhouse and condominium associations, finds clients more interested in energy audits, Vice President Mark Gittleman said.
It is also finding that higher energy costs translate into quicker returns on conservation investments. Earlier this year, for example, the company added more exhaust controls to the 27-story Grant Park condos in downtown Minneapolis, a $5,800 expense that Gittleman estimates will save residents $13,000 a year in natural gas use.
Staff writers Laurie Blake, Mary Jane Smetanka, Tony Lonetree, Jackie Crosby, Dee DePass, Neal St. Anthony, Chen May Yee, Rodrigo Zamith and Paul Levy contributed to this report. H.J. Cummins • 612-673-4671
