CALGARY -- Fly-fishing guide Josh Nugent recognizes US$100 oil means fuel prices will soar this summer, so he is taking action now to keep his tiny, six-year-old outfitting company afloat.
The 26-year-old entrepreneur, with a little help from his brother, a mechanical engineer, has converted the diesel engine in his fuel-guzzling Suburban to burn vegetable oil.
Mr. Nugent expects to put more than 50,000 kilometres on the vehicle between May and October driving clients back and forth each day between Calgary and entry points along the Bow, Oldman and Crowsnest rivers in Southern Alberta.
While ferrying mostly U.S. oilmen aboard a dory down trout streams sounds like an exotic pursuit, it doesn't pay that well at the best of times.
Gear and food will strip between 5% and 10% from Out Fly Fishing's expected revenue of $50,000, and Mr. Nugent predicts fuelling his SUV with diesel - which he says could cost as much as $2 a litre by the time driving season kicks in - would otherwise eat up another 20%.
"It's not like I can run this business driving a little four-cylinder," Mr. Nugent said. "The truck's not the most fuel-efficient vehicle in the world, but we have to pull a boat, carry gear and take clients around. Fuel is by far my biggest cost, more so than all of my fly-fishing supplies."
With the Canadian dollar's ascent above the greenback eliminating the edge he had over rival fishing hotspots in Montana and Idaho, he can't chance raising his daily rate above $500 to pass rising costs on to clients.
Mr. Nugent said his next task is to secure a reliable, cheap fuel supply, which won't mean buying up vast quantities of canola oil from a supermarket, where a litre sells for about $3.50. He is in talks with a handful of Calgary restaurant owners to buy their used cooking oil, which he figures isn't a bad proposition for restaurants that pay a disposal company to take the stuff off their hands.
"It burns clean, too," Mr. Nugent said. "But with the limited amount that's out there, supply could be a problem if a lot of other people get the same idea."
There will likely be no shortage of similar feats of ingenuity among Canadian small businesses as rising energy costs for many become the top challenge in staying afloat.
The most recent cross-Canada survey updating the Canadian Federation of Independent Business's Business Barometer index showed 62% of those polled said energy costs worsened in the three months before December, making rising energy costs the leading concern of any key business condition.
Daniel Kelly, CFIB senior vice-president, legislative affairs, said small businesses have been on the same "rising-energy-cost ride" going on two years, and while US$100 oil represents a milestone, it more importantly signals there is likely no relief ahead.
"Unless we see a decline in pump prices soon, small businesses will have to factor in the higher level for the future, and that will take its toll on expectations," Mr. Kelly said. "It would be a rare small business that would not be affected," he added. "Every retailer is paying more to have their products delivered, anyone that does any shipping is affected, and obviously a company like a trucking firm will be dramatically affected."
On the other hand, small business owner Wade Williamson of Calgary, whose firm, Belvedere Solutions, markets a cutting-edge oil-filtration system that promises to reduce the need for heavy-vehicle oil changes, expects business to increase if oil prices continue to surge beyond US$100 a barrel. "For a heavy transport rig, which I used to drive, a trucker can cut what might be a yearly [cost] for oil changes of $4,000 in half," he said.
Cathy Hay, senior associate at MJ Ervin and Associates, a firm that tracks Canadian gasoline prices, said businesses are at least fortunate oil didn't climb to US$100 rapidly at the height of the summer driving season.
Oil prices in 2007 rose 57% and wholesale gasoline prices climbed at a similar rate, she said.
"If we go into the spring with crude prices at or around this level, we'll be looking at gas prices anywhere from 15¢ to 25¢ a litre higher, on average," Ms. Hay said. "From a consumer and small business perspective, at least with it happening now there is time to plan."
Financial Post
jharding@nationalpost.com