As consumers cut back on eating out, movies and other discretionary spending to find room in their budgets for rising fuel prices, businesses are left to wonder whether they're seeing the start of a long-term decline in revenue and rise in costs.

"How long can businesses eat these costs?" Choy said. "I don't know whether the market can handle it."

EXPANSION MAY SLOW

Lawrence Boyd, a labor economist with the University of Hawai'i-West O'ahu, expects the growth rate for the state's economy to be "well above 3 percent" for the rest of year and into 2006. But Boyd worries that gas prices could slow the expansion.

"Energy costs basically go into every product one way or another, so it affects everything to varying degrees," Boyd said. "The ramifications can be very profound on us. It will spark an adjustment in behavior where there will be shifts in consumption patterns. I can see a whole chain of events flowing out of it, like people putting off large purchases. People are spending less, so that means some businesses will hire less. ... It's like watching a demolition derby unfold in slow motion."

Honolulu's consumer price index rose 3.1 percent in the first half of this year, compared with a year earlier. Leroy Laney, a Hawai'i Pacific University professor of economics and finance, said he wouldn't be surprised to see that number rise for the rest of 2005.

Heading into 2006, Laney said, "It wouldn't take much to put it up in the high 3 range and possibly as high as 4 percent.

"We're in a new price regime for gasoline," Laney said. "It's not going to come back down. This is the way energy crises work: Personal budgets are finite and gas prices have gone up, so there's not much left over for other things."

LABOR SHORTAGES

Even without the recent jump in gas prices, Laney was expecting Hawai'i's economy to begin slowing down — or "maturing" — after nine years of growth of both personal income and real gross state product.

"We are seeing at least a slowing in the rate of growth because of various things including labor shortages and other inflationary factors, not the least of which is the price of housing," Laney said.

Personally, Boyd has watched grocery store prices go up at the same time that he's cutting back on the amount of miles he logs on his Saturn. Boyd is also booking a trip to Miami in December and has been shocked at the price of air fares from Honolulu to Miami, which he says have nearly doubled since last year.

"Like a lot of other people, I have become much more conservation conscious in terms of driving," Boyd said. "And I'm basically cheap, so I've cut out things like Room Service In Paradise because it costs more."

COSTS PASSED ON

Keith Gomes, the general manager of Room Service In Paradise, said he hated to impose the original gas surcharge of 50 cents per delivery and then increase it last week to 90 cents — which Gomes said goes directly to his 60 drivers.

Now Gomes wonders how long it will take before rising fuel costs force him to raise the surcharge to $1.

"We really didn't want to pass it on to our customers, but our drivers are starting to feel it," Gomes said.

Some of the ripple effects on businesses have been blunted by Hawai'i's bustling tourism industry, which is on track to welcome more than 7 million visitors this year for the first time.

William Aila, harbor master for the Wai'anae Boat Harbor, watched a group of Japanese tourists board a tour boat in Kane'ohe Bay last week and said, "Just think, if tourism wasn't booming, we'd be in deep kim chee, as they say.

"I don't go out as often as before," Aila added. "It costs just as much to drive to McDonald's as it does to pay for the food."

Scott Thompson, the head coach of Ka Mamalahoe Canoe Club, has seen the price of hiring escort boats jump to as high as $1,000 heading into next Sunday's canoe race across the Kaiwi Channel.

Three or four years ago, escort boats cost as little as $500.

"But the days of the $500 escort boats are long, long gone," Thompson said.

'EXPENSIVE RACE'

With air fares, car rentals, escort boats and other costs all going up, individual paddlers now pay as much as $300 just to compete, said Ben Ancheta, men's coach for the Koa Kai Canoe Club.

"Last year it was around $250," Ancheta said. "It is an expensive race. I'm sure it's affected a lot of people."

The extra $50 means Koa Kai paddlers like Bo Samuelu have to cut out frills like going out with their friends to absorb the dual blow of higher gas prices and higher costs for this year's race.

"It definitely hurts this year," Samuelu said. "I love going out and hanging out with my friends, but I love paddling a little more, so I have to sacrifice stuff to make it work."

Some of Samuelu's Koa Kai teammates had to drop out of the Moloka'i race this year, causing a tremor through the club as crews scramble to fill the vacancies with paddlers from other Koa Kai boats — and even from other teams.

"We're losing guys, so now we have to scrounge around for other guys who may be interested," Samuelu said. "So you end up mixing and matching from other clubs."

The fallout is being felt at the Island Paddler store on Kapahulu Avenue, where business recently dropped 10 percent.

"Most of the year was really good," said one of the store's owners, Ron Cotteen. "But once that gas thing got out of control, the general flow of traffic has been slower."

RISES COME QUICKLY

Across the island in Kane'ohe Bay, Choy opened a second letter in the same week from Garlow Petroleum, the Mapunapuna company that delivers his diesel fuel for commercial boats.

The first letter informed Choy that the price of a gallon of diesel would cost him another 6 cents. Two days later, Choy received a second letter saying the price would immediately go up an additional 6 cents per gallon.

"Ah, geez," Choy said, as he held both letters in his hands. "How I love to get these little love letters. That's pretty fast inflation."

Then on Friday, Choy received a third letter from Garlow, saying his diesel costs would rise another 5 cents — for a total one-week increase of 17 cents per gallon.

"That's a lot to absorb in one week," Choy said. "There was no explanation. It just says it's now going up 5 cents. That's all they tell you. They don't give a reason."

So starting next week, Choy said he'll have to increase the price of diesel fuel to $3.01 per gallon.

"We're seeing volatility like we've never seen before," said Tony Fernandez, president of Garlow Petroleum. "Like anything else, these increased costs have to be passed along to survive. So everyone adjusts the goods and services that they provide."

Choy, like some other business owners, is trying to absorb his cost increases for things like bread and not pass them on to the customers who still come out to fish from the pier or take out boats from the 75-slip harbor.

Choy also refuses to reduce expenses by cutting the hours for his nine employees. Still, with gas prices well above $3 a gallon, Choy faces another costly expense.

He needs to use old-school, analog readouts on his separate gasoline and diesel pumps because the salt air damages newer computerized models. But Choy's current readouts only go up to $2.999 per gallon.

So he taped up a handwritten note trying to explain that the $1.65 price for regular gas is only for half a gallon.

"It only confuses people," Choy said. "So I need to change."

But the price tag for new analog readouts runs $700 apiece to measure fuel prices from $3 to as high as $5.999 per gallon.

"Hopefully," Choy said, "we won't ever have to charge that much."

Gas-price shifts

Regular unleaded gasoline prices on O'ahu hit a peak of about $1.59 a gallon in 1981. That's $3.43 a gallon in today's dollars. Here's how last Thursday's prices compare with prior years:

Date Price*

June 1943 $2.14

June 1981 $3.43

Sept. 19 $3.59

Thursday $3.19

* In 2005 dollars

Sources: The Department of Business, Economic Development and Tourism; Paul Brewbaker, Bank of Hawaii; AAA Daily Fuel Gauge Report

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com.