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Promo Firms Contending With Rising Fuel Costs

Average gas prices this week increased to their highest levels of 2017 – an upward trend that analysts expect to continue for at least the short-term. With prices escalating at the pump, some promotional product firms are already feeling the pinch in the form of rising costs to ship product.

The American Automobile Association (AAA) reported Monday that the average cost for a gallon of regular unleaded gas in the United States increased for a 20th consecutive day, ticking up to $2.41. Having just reached a 19-month high, Monday’s average price was 12 cents more than a month ago and 30 cents more than a year ago. Similarly, the average cost for diesel has soared 42 cents over the last 12 months, rising to $2.53, according to AAA.

The upswing in fuel prices has started to impact promo industry firms. For instance, LogoSurfing.com (asi/246818) was just hit with a 22.8% hike in the service charge it’s assessed by a local courier company that the Georgia-based distributorship sometimes uses. “We are also seeing higher shipping costs from the big three – FedEx, UPS and DHS,” says CEO Matthew Watkins. Significantly, LogoSurfing.com is finding that shipping costs for drinkware are becoming prohibitive. To deal with this, the distributorship has started trying to source more from suppliers that are close to clients’ locations.

Other distributors haven’t felt the squeeze yet, but expect they will. “We have not seen specific rises in our shipping cost yet, but I do absolutely see it being a cost that will increase,” says Kirby Hasseman, owner of Hasseman Marketing & Communications (asi/221824). “It’s one of those charges that is a huge pain point for customers, but is very difficult to solve.”

Josh Frey offered similar prognostication. “When gas prices have gone up, inevitably carriers – UPS, FedEx, trucking, boats from China – will ding us with a surcharge that we then have to decide if and how we will pass on to the customer,” says Frey, founder of The Swag Coach Program (asi/340317) and On Sale Promos.

Frey’s approach to handling heftier shipping costs centers in trying to find ways to minimize the impact on clients if at all possible. “I do everything I can to not change the terms of doing business with me,” Frey says. “The bottom line is I would find a way to bury this additional fee without bringing it to bear on my customer.”

Rising costs in crude oil, geopolitical tensions, oil inventories, anticipation of the summer travel season, and the switch by providers to more expensive summer-blend fuel are among the factors contributing to an increase in fuel costs.

Last week, the Energy Information Administration indicated that the rise in prices has not yet reached its zenith, predicting that retail gas will cost an average of $2.46 per gallon from April through September – up from $2.23 a gallon over the summer of 2016.

While that’s far below the historic average high of $4.11 in July 2008, some analysts think the EIA’s forecast is a bit too optimistic. “Assumptions about summer driving demand, global oil prices, unforeseen refinery breakdowns, pipeline disruptions or even unanticipated geopolitical considerations, can trigger dramatic regional- and continent-wide prices hikes that could disrupt rosy forecasts,” senior petroleum analyst Dan McTeague wrote for GasBuddy.com.