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Small Business Feeling the Pinch at the Pump

Anyone who has stared in shock at their gas-station credit-card receipt knows oil prices are headed up.

Any threat to refinery output, no matter where in the world, is enough to make prices shoot even higher. This week, attacks by rebels in Nigeria and fears of a refinery strike in Scotland -- not to mention increased demand from China pre-Olympics -- sent oil to a record price of almost $120 a barrel.

The price surge may be great news for companies such Exxon Mobil (XOM) and Chevron (CVX), which both report their first-quarter results next week. But it's been terrible for companies that use vast amounts of fuel. Airlines, in particular, have seen their expenses soar as their stock prices plunge. This week, Delta Air Lines (DAL) and Northwest Airlines (NWA), which are preparing for a merger, announced a combined $10.5 billion in losses, blaming record-high fuel costs.

Small businesses may measure their losses in thousands rather than billions, but the toll can be just as dreadful. Right now, business owners across the country are wondering how to pass the cost along to customers without driving away those customers.

"It's a big issue for us," says Richard Kane, CEO of International Limousine Service in Washington, D.C., and president of the National Limousine Association. He's been on the front lines of high gas prices: His company runs 120 vehicles and goes through 1,000 gallons of gas each day.

Although many small-business owners are reluctant to raise prices for fear of sending customers to a competitor, Kane warns that this is not a temporary crisis that can be ridden out. "We as an industry have to pass the cost along to the customer," he says. With regular unleaded gasoline up 26% from a year ago and diesel prices up 40%, there is simply no way to keep eating those costs.

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