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Chapter 1: How is the war in the Middle East affecting oil and jet fuel prices?
The widening ripple effects of the hit to the oil markets due to the war in the Middle East. Plus, a check-in on small businesses. From American Public Media, this is Marketplace. In Washington, I'm Kimberly Adams in for Kai Rizdal. It's Tuesday, March 10th. Good to have you along.
There are all sorts of estimates floating around, but experts and government officials are saying the war with Iran is costing the U.S. government up to $2 billion a day. In the private sector, the impact on oil markets and other commodities is already showing up in higher prices across several industries, including travel.
Now, if you have any big summer trips planned, FYI, airfares are climbing as we speak. The problem is simple. As the price of oil goes up because of the war in the Middle East, so does the price of jet fuel. Now, the way airlines are responding, not quite so simple. Marketplace's Kaylee Wells explains.
Last time we saw a spike in jet fuel prices like this was at the beginning of the war in Ukraine. Fuel went up and airfare went up, but people paid up anyway. because during that time, there was just such a crazy level of demand for travel. It was during that revenge travel period. Meghna Maharishi is an airline reporter at travel industry news outlet Skift.
She says back then, we were coming out of the pandemic craving to go somewhere with a bunch of saved-up money burning holes in our pockets. Today, demand for travel is still elevated, but not that elevated. So I think those increases are going to probably feel a little bit more painful today.
More painful partly because higher oil prices mean less disposable income for consumers, says independent airline industry analyst Robert Mann. Notably, leisure customers have to decide, well, you know, am I going to pay to light the house and heat the house and fill the fuel tank on the cars, or am I going to go buy airline tickets to see Mickey Mouse?
The price hikes will likely target travelers who can afford them, says David Slotnick, contributing aviation editor for the travel site The Points Guy. If they see a $10, $20, $30 increase in their tickets and they're already spending $1,200 on a round-trip flight to, say, Japan, that's not something they're necessarily going to notice or be affected by.
Which also means airlines that fly to Japan or elsewhere overseas are better positioned to weather this storm. But for the domestic and budget airlines? Their customers are less likely to just absorb that without minding. And that might mean that those airlines need to absorb more of that cost themselves.
Airline analysts are reluctant to offer booking advice right now with all the uncertainty surrounding the war, but Slotnick says he wishes he'd booked his family's summer trip to Europe weeks ago. I'm Kayleigh Wells for Marketplace. Wall Street today, everyone's still watching the oil markets. And, well, the administration's social media posts. We'll have the details when we do the numbers.
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Chapter 2: What challenges are airlines facing with rising jet fuel costs?
During the heightened ICE operations in Minneapolis over the last few months, small businesses have hosted fundraisers, grocery runs, food drives, and even helped community members pay rent. The cafe Modern Times, which recently rebranded to Postmodern Times, transitioned to a pay-what-you-can model in hopes of offering relief to their neighbors.
It was temporary at first, but now it's the permanent business model. Dylan Alverson, who has owned Postmodern Times for the past 15 years, joins us today. Dylan, welcome. Hi, thank you. Lots of other businesses in your area temporarily shifted how they operated due to the ice crackdowns. But what made you decide to permanently move to this pay-what-you-can scale at your restaurant?
Well, the first initial impulse and... Impetus for change was the witnessing firsthand repeated violence inflicted on our neighbors by the federal government, feeling of helplessness and overwhelming urge to do something. So how does this model work? Like, what's it like being a customer in the cafe and placing an order? As far as being a customer, a lot of it hasn't changed. People walk in.
We have dine-in service. We have a counter ordering in a side room. And the only thing that's missing is the exchange of money. The night before we opened this way, we just basically re-edited all of our menus and our POS system and just took any price points off of it. But it works just like any other restaurant. You walk up, order food, and you can decide on whether or not you donate or not.
But it's not a requirement and it's not something that we're putting anyone on the spot to do. Yeah. Do you offer people like a suggested amount for an individual item or a total to help them kind of think about how they might offer a contribution if they're able? Yes, if people ask. But it's not like listed or anything? Correct.
The thing about giving is that we are trying to do it in a way that doesn't isolate or separate people with differences in income, which is the basis of our country. How's it going so far? Are you breaking even every day? Well, it's a different way of accounting, as you can imagine. And daily doesn't really matter. What we're looking at is like a larger input and output.
And so one thing that happened as soon as we made this change is that we received a...
pretty large public amount of support someone flew from Texas to give us $2,000 the first week we were open and he came back last week so typically February in Minnesota in restaurants there's I can't remember a single February that I've run a restaurant in this town where we haven't had a loss for the month and this was our first February where we didn't lose money
What has it been like for you trying to run a business in Minneapolis over the last few months during this crackdown? I mean, the same as most business leaders that I talked to, which has been near impossible. Especially for restaurants, this plague from our federal government is probably going to wipe out a quarter or half of our restaurants in the city if things don't change.
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Chapter 3: How are small businesses responding to economic uncertainty?
I honestly can't believe it's already been a year. I was worried that we would be something fun and exciting and new for like the first six months. And then we would see like this massive drop off. I'm happy to report that that has not been the case. It has been pretty steady.
Like, honestly, it almost feels like I've been waiting for like the other shoe to drop and it hasn't, which I'm going to knock on wood and keep hoping that it doesn't. We have expanded in a couple of different ways. Like we introduced our very own book truck, which is Poppy the book truck. So she is fully pink from head to toe.
And we had her like specially built out, which makes like setting up for an event so easy. Cause all we have to do is open the door. We were able to pay Poppy off when we purchased her, which was really nice. And right now it's kind of just a matter of getting her out to as many events as possible.
When it comes to like costs specifically, our lease is up this year and now we have to pay rent and that's going to be an increased thing. insurance goes up and I want to increase my team's salaries or how much they get paid hourly. So it's so funny because I was like, oh my God, we get this massive revenue boost at the beginning of us being open.
But then that kind of starts to trickle down slowly, but your expenses go up. So it kind of becomes like an X where the money that's coming in is a lot less than the The thing that is always on my mind is the sustainability aspect, because I really do like this is I was meant to do what I'm doing now. And this is something that I want to do for the next 20 years of my life at minimum, like 2030.
Like I want to retire doing this. The fact that I get excited to respond to emails, I think that that was the thing that made me be like, yeah, I want to do this forever. Yeah. Jane Rodriguez going on year two. We can't do this series without you. So write to us about what's happening in your economy at marketplace.org slash my economy.
This final note on the way out today, another economic data point before we let you go. Existing home sales came out this morning up 1.7 percent from January to February. Pick your adjective here, modest, sluggish, meh, growth sales month over month. But according to Redfin, a lot of sellers that delisted their homes in the fall are starting to put them back on the market.
Jordan Mangy, Zoniel Maharaj, Janet Nguyen, Olga Oxman, and Virginia K. Smith are the digital team. And I'm Kimberly Adams. We'll see you tomorrow. This is APM. You can turn to Marketplace to hear from powerful leaders and everyday people about the economy and their roles in it. And now we hope we can turn to you. Marketplace is facing real threats and challenges as we plan for the future.
As a public media program, donations from you are a critical part of our budget. So here's one action you can take right now that's going to have a long-lasting impact. Start a monthly donation to support our work. Five bucks a month is a great place to start. Head to marketplace.org slash donate and thanks.
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