Wednesday, April 25, 2018


Businesses sending along higher energy costs to consumers

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Summit Brewery's Mark Stutrud says heat from vats can be captured for other beer making processes similar to energy conservation techniques common in Europe (MPR photo/Dan Olson)
Three-dollar-a-gallon gasoline is a price spike that some say will come down. Others disagree and say the higher costs are here to stay. Business people say they are building the higher costs into the price they charge for the products.

St. Paul, Minn. — Old Dutch president and CEO Steve Aanenson says his Roseville-based company uses natural gas to fire the burners to make a chip from a slice of potato that is 80 percent moisture.

"When you process it and make it into a potato chip it winds up at about one and a half percent moisture. So it takes a lot of energy to cook all that water of out it," he says.

Natural gas prices have doubled the past two years.

Then this week, when gasoline prices jumped, Aanenson recalculated the added cost of fuel for his fleet of Old Dutch vehicles.

"At $3.10 a gallon it increases the cost of running our route trucks, each one, by over $4,000 a year," he says.

Aanenson worries his $3.10 a gallon projection is too low. Whatever the cost, he says, he has no choice but to try pay for the higher costs by charging more for potato chips.

The people who haul potato chips and everything else delivered by trucks in this country have for several years been tacking on single digit percent surcharges to cover rising fuel costs.

Larry Hall, the president of Logistics Planning Services in Mendota Heights arranges for deliveries of various products around the world. This week, he says, businesses that haul goods in the United States began tacking on double digit delivery surcharges of 16 percent and higher.

"Meaning that if you shipped something from Chicago to Minneapolis and it cost you $100 for the freight another $16 will be added on to your bill just to cover the cost of the fuel," he says.

That means the cost of delivering nearly everything including beer is going up. Summit Brewery president and founder Mark Stutrud says the beer haulers who deliver his St. Paul-based product across the upper Midwest are being hit hard with higher fuel costs.

The actual brewing of beer is not very energy intensive. Even so, Stutrud says, the increased cost of natural gas is a motivation to look more closely at how Europeans, long accustomed to paying higher energy prices, have adapted.

"There are breweries this size in Germany that will produce hot water from the steam that is going up through the stack of a brew kettle...and you can just continue to improve and look at smaller opportunities to recapture energy," he says.

The sum of all those smaller opportunities can amount to significant energy savings as companies coping with spiking energy costs learned in the 1970's.

Old Dutch's Steve Aanenson says he can trim some costs by purchasing delivery trucks with smaller engines to deliver the company's nearly light-as-air snack products.

"We could get by with a smaller motor in our diesels, but they are not available," he says.

A few years ago, manufacturers discontinued making models with smaller engieners in favor of more powerful vehicles, Aanenson says.

Rising energy costs will create pain and suffering and opportunity. Consumers will pay more for products, reduce their consumption or go without, and companies bottom lines will reflect the results.

Businesses looking for ways to trim energy costs will create a demand for efficient machines and practices. They'll also take a harder look at China and other low wage countries as places to do business. Logistics businessman Larry Hall says the United States has failed to pay enough attention to energy issues and to the fast growing low wage economies overseas.

"We're just going to find ourselves in a whole new ball game," and Hall says. "I don't think Americans have woke up to the fact that the global economy is going to dictate a lot of new parameters out there that we've never dealt with before."