A YEAR AGO, STEVE COLEMAN'S FUEL bills ran between $3,000 and $4,000 a month. That budget line has since tripled to about $12,000 a month, says Coleman, the president of Alcoa, Tenn.–based Anderson Lumber and Home Center.
Everyone in home building is feeling the pinch of higher fuel costs. Gasoline prices spiked after Hurricane Katrina, as oil prices passed $70 a barrel, and diesel fuel followed suit after Hurricane Rita. According to the federal Energy Information Administration, diesel prices stood at $3.157 a gallon on Oct. 24, 94.5 percent higher than a year ago. Gasoline prices have started to retreat a bit: A gallon cost a nationwide average of $2.603 on Oct. 24, down 12.2 percent from Oct. 17, but that figure remains 57.1 percent higher than last year.
Coleman and many other suppliers have turned to fuel surcharges on their deliveries to recoup some of the increased cost. In an April survey conducted by the Southern Building Material Association, 19 percent of respondents were adding fuel surcharges or increasing prices to cover gas costs; in September, that number had increased to more than 75 percent.
Coleman added the extra fee—determined by the distance of the delivery—at the beginning of 2005 and has received only two complaints from his customers. He attributes part of that response to his approach: printing surcharges at the bottom of the invoice, rather than building the extra cost into the price of materials. “I'm not going to hide it,” Coleman says. “And I'm willing to adjust the surcharge if the price of fuel goes down.”
Anderson Lumber has also adopted fuel-conservation strategies, including using more fuel-efficient trucks for smaller deliveries and adding more delivery loads on each truck. Builders are sensitive to those details, too. Kevin Holland, vice president of Friendswood, Texas–based Cervelle Homes, says he tries to have multiple addresses in each subdivision ready to accept deliveries at the same time to cut down on supplier trips.
Though he understands the reasoning behind surcharges, Holland says builders may look for suppliers located closer to their jobsites to reduce fees determined by delivery distance. Cervelle Homes wants to maintain its long-term relationships with suppliers, but Holland, who is also president of the Greater Houston Builders Association, says he'll keep the dialogue about the surcharges open: “We are going to get lower [gas] prices, and I plan to go back to them. We're going to have to revisit this.”
SOURCE: U.S. CENSUS BUREAU
SOURCE: FREDDIE MAC
SOURCE: UNIVERSITY OF MICHIGAN SURVEYS OF CONSUMERS
SOURCE: U.S. CENSUS BUREAU
Learn more about markets featured in this article: Anderson, IN.