SAT., APR 29, 2006 - 2:00 AM Prices of some goods may rise to keep pace with fuel costs BEN FISCHER and NATHAN LEAF Wisconsin State Journal Springtime vacations and daily commutes are already sapping the wallets of Madison-area drivers due to increased gasoline prices, but the cost of a wide range of goods and services is likely to climb if fuel expenses stay high.

Transportation-intensive companies, many of which instituted fuel surcharges during previous increases in fuel costs, are again introducing them.

Other business owners say they want to avoid passing on higher costs to customers, although they acknowledge fuel costs are forcing them to rethink their options.

If $3-per-gallon gasoline settles in as a fact of American life, it won't be long before those higher costs show up in the price of just about everything, said Cynthia Jasper, a UW- Madison professor who studies the retail industry.

"Ultimately, it will be passed on to the consumer," she said. "It has to be. (But) I think a lot of people at this point feel like it's not a permanent increase."

From the higher prices for ingredients that need to be shipped to its Middleton facility to the higher cost of trucking beer to Monroe for bottling, gasoline prices are taking their toll, said brew master Kirby Nelson.

Business, especially those in highly competitive or narrow-margin industries, know the potential risk of raising prices, Jasper said. They're likely to try other options first, including getting by with fewer employees, fewer hours or lighting their stores more dimly.

But some companies are passing on the costs. Fuel is a constant concern at Union Cab, and the company deals with it by planning ahead, said John McNamara, Union's account manager.

Union Cab looks at gasoline futures to determine rate changes, which Madison cab companies are only allowed to make every six months. McNamara also said the company looks to save money by educating its drivers.

To improve mileage, McDonald said the company stresses driving within the speed limit, accelerating evenly and turning off air conditioning while idling.

Historically, energy-price increases have wreaked havoc in the U.S. economy by forcing consumer prices upward, most notably in the 1970s when oil shortages were the major factor behind a deep recession.

Three decades later, though, the economy is far better equipped to absorb costs, said Richard Mattoon, a senior economist for the U.S. Federal Reserve in Chicago.

Energy, whether it is gasoline, electricity or heating fuels, are a far smaller component of total costs, thanks to dramatically more efficient equipment and vehicles, Mattoon said during testimony before Wisconsin lawmakers Wednesday.

For example, those margins have forced Dunham Express, a Madison delivery company with locations throughout the Midwest, to impose a surcharge on most of its deliveries, said company partner Mark McDonald.

"I'd say it's a pretty significant impact financially," McDonald said. The company has increased the surcharge over the last several months from 6.5 percent of the total invoice to 9.5 percent.

This is cache, read story here