Observing the storefront of his shop across the street, slightly to the right, Mike Roach, co-owner of Paloma Clothing, observes one of the priciest gas stations in Portland, Oregon.
His clientele also notices the cost: $4.85 per gallon.
“It’s really going to shock people when the price eclipses $5,” Roach commented.
Consumers are feeling strained, and passing on price increases is unfeasible for American retailers. Consequently, they are exerting maximum effort to avoid doing so.
CNN spoke with four business proprietors—a clothing store owner, a baker, a supplier, and a factory owner—about their intended strategies for managing escalating fuel expenses.
The Clothing Store with a Dedicated Customer Base
“We don’t control consumer confidence; we only control the price point we sell to them at,” stated Roach, who has co-owned Paloma with his wife Kim Osgood for five decades. “Therefore, we would rather earn less margin on an item than raise our prices.”
Roach anticipates receiving higher fuel surcharges soon. His plan is to absorb these increases by drawing the rising transportation costs out of his profit margin.
Portland, Oregon. Courtesy of Carly King
Roughly half the apparel Paloma stocks is imported, arriving from East or West Coast ports before being moved along the coast or across the country via UPS trucks. Typically, these shipping costs are modest expenses deducted from Roach’s keystone markup—a common retail tactic where wholesale costs are doubled at the register, and overhead is covered by the difference.
But if this gasoline price shock mirrors the spike in 2022, when diesel peaked at a record $5.82 a gallon following Russia’s invasion of Ukraine, Roach says he anticipates significant fuel surcharges in the near term.
That’s not a price he’s willing to add to his tags. More concerning than his profit margin, Roach worries about the impact of soaring gas prices on his profitable sales volume.
Courtesy of Carly King
“Customers need a certain level of security about the future to walk into our place, be tempted, and purchase,” he said. “I studied economics, but you don’t need an economics degree to know you’ll sell fewer goods at higher prices.”
Paloma has spent five decades working to build customer trust—including a long-standing policy of no-questions-asked returns. However, foot traffic has diminished, and return rates have climbed substantially.
This is why he knows his customers no longer have financial cushions to spare.
“We will do everything in our power to avoid increasing prices,” Roach affirmed.
The Bread Bakery Stuck in the Middle
If retailers resist raising prices, it places wholesalers in a difficult bind.
“There was a time when grocery stores would accept price changes, but those days are gone,” said Nels Leader, CEO of Bread Alone Bakery, an organic sourdough operation. “There’s no space left.”
This has forced small businesses like Bread Alone to confront a set of poor choices: absorb the costs, press retailers for more money, or cut expenditures.
Wholesalers and manufacturers are in an especially tough spot because they are hit from both ends: raw materials cost more en route, and finished goods cost more on the way out.
Courtesy of James Chororos
If diesel prices stay elevated, Leader anticipates having to apply a temporary delivery surcharge to grocery stores, which Bread Alone will remove once conditions allow.
Robust relationships with both customers and suppliers can help businesses weather difficult periods, like this price surge.
Bread Alone has cultivated strong ties with local farmers and built a regional supply chain that helped buffer it against rising transport expenses during prior price escalations. But this strategy brings its own challenges: more expensive ingredients restrict high-margin product offerings.
“In moments like this, the hard work pays off,” Leader noted.
Consumers could benefit from a similar approach, he suggests.
“Local foods are more stable than global ones, and we don’t require petroleum to grow organic food.”
The Factory With No Options
Shirley Modlin spent all of Thursday in meetings trying to find reductions in expenditure. Her small manufacturing facility in Powhatan, Virginia, relies on tungsten carbide tools for precise cutting.
However, tungsten prices are particularly volatile during wartime—it’s utilized in armor-piercing artillery. Consequently, the cost of carbide tools has more than doubled in the past fortnight, Modlin states.
Modlin finds herself powerless.
“My clients won’t tolerate me raising prices to cover the increase in our tool costs,” said Modlin, owner of 3D Design and Manufacturing. “Customers don’t get it; they want this product. They say, ‘If you can’t give it to us, we’ll find someone else.’”
Modlin annually offers her team competitive benefits and raises to retain and attract new employees. But last year, tariffs shook American industry, spiking the cost of imported raw materials—Modlin saw aluminum and steel prices increase by 65%.
Last year, she couldn’t grant salary increases. And on Thursday, facing another wave of rising overhead, Modlin had to demote an administrator from full-time status to part-time, removing their benefits.
“He has a house payment; he has bills he needs to cover. It’s just awful,” Modlin lamented. “Something has to give. You can only cut so many breakroom supplies.”
The Spot Carrier That Cannot Set Prices
Strong Pact Trucking handles freight provided to them by shipping companies—effectively taking on existing contracts on a spot basis.
But because fuel surcharges are line items in the carriers’ contracts with the companies they deliver for, owner Karim Miller sees no supplemental revenue for his Chicago-based spot carrier company. This means he receives zero compensation for the spiking diesel costs.
“You have to calculate and see if it makes sense,” Miller said. “Sometimes you just have to park it until things calm down.”
This puts his workers in a tough spot, he explained.
“We make good money, but fuel is the issue,” he acknowledged. “That’s why a lot of carriers don’t last long.”
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