How Dropping Gas Prices Have Helped the Live-Music Industry Save Big
Acts that have been out pounding the road through the fall into the new year have received an unexpected holiday gift, as decreases in prices at the pump are saving the touring industry at large millions of dollars over the past several months.
The cost of fuel has been dropping since June of 2014, and by Jan. 12 had reached a five-year low -- which is great news for the touring industry. Based on U.S. Dept. of Energy averages, diesel fuel was running around $3.91 per gallon a year ago, and is currently about $3.13 on a national average. At that rate, an arena tour with 10 trucks and four buses averaging five miles per gallon is saving as much as $22,000 over 30 tour dates and 10,000 miles. Extrapolate that into the summer months, when more than 1,000 buses and 10 times that many touring trucks are on the road, and the industry will save more than $15 million per month from a year ago at current price levels, were they to hold.
Right now, Fielding Logan, a manager at Q Prime South who watches over the touring concerns for such clients as the Black Keys and Eric Church, says he's seeing the impact of fuel prices on Church's current arena tour. For the September-December time period, Church's tour, "saw a savings of about 25 percent in budgeted fuel costs versus actual fuel costs, [resulting in] about $30,000 [saved] over 33 tour dates," Logan says. "I expect savings would have been better but, while fuel costs went down from our budget, our number of trucks went up."
Indeed, less than $1,000 per show doesn't even amount to a good 30 minutes at the merch stands for an act of Church's stature. It's the smaller, more streamlined, tours that are realizing the biggest relative saving. That's especially true for those bands in vans, as unleaded prices have seen a more dramatic decrease than diesel, from $3.33 a year ago to $2.14 on average now. Ben Erickson, tour manager/production manager for Chromeo, estimates that on a 12,000 mile tour -- the average for a 30-date nationwide run -- a band in a Ford Econoline van towing a trailer and managing eight miles per gallon would save about $2,000 per month in fuel costs. At that rate, band that tours 10 months out of the year -- as most developing acts do -- is saving $20,000 in fuel costs, "and that's a big number for a band living in their van," Erickson says.
For their part, Chromeo, which just finished a tour in support of latest release White Women, went out with one semi truck pulling a 53-foot trailer, and one bus pulling a trailer, the latter a trend that began when gas prices began to skyrocket at the turn of the millennium. Diesel has dropped about 75 cents per gallon since July 2014 and, given that rate, an act like Chromeo is saving roughly $4,000 a month in fuel costs from what they paid last summer. "During an 18-month record cycle, where a bus and truck are used for 12 of those months, there would be a $50,000 difference in fuel costs over the course of the cycle, if fuel prices stayed at or below where they're currently trending," Erickson says.
Unfortunately, these current prices are occurring during the lightest touring period of the year, as the vast majority of acts tour in the summer, regardless of fuel costs, and costs tend to go up in the summer. Up or down, gas prices don't dictate touring strategies, which are most influenced by album cycles, the summer festivals, and demand. "If there is demand, most likely there will be touring," says Erickson.
Not effected: shipping and air costs, which is a major expense for international tours, generally overseen by freight forwarders like Justin Carbone, VP at Sound Moves. "We've seen air freight fuel costs fluctuate with the industry, but they haven't gone down as dramatically as you see at the pumps," says Carbone. "For example, the surcharge on United Cargo was around $1.25 per kilogram on international cargo this summer, but it's now only down to about $1.00 per kilogram.I haven't yet seen a reduction in fuel from the sea shipping lines. They take any chance to increase rates, but hardly ever reduce them when the prices go down."
Meanwhile, Chromeo is gearing up for the X Games tour in late January and plans to tour extensively in the spring and summer, likely paying significantly different prices for petrol from beginning to tour's end. For them, and all tours planning a summer run, budgeting a tricky endeavor. "Its important to hedge variable costs like fuel when budgeting," Erickson says. "I wouldn't use the lowest possible price, I'd use an average of the nation-wide average over the last 12 months. Cautious budgeting is important, so there's no surprises at the end of the tour."
So, while it's doubtful a band would tour because fuel prices are down, Erickson points out that if some global crisis caused prices to spike drastically, "management would be revising budgets and taking a closer look at fuel costs, especially for larger arena and stadium tours, where there could be as many 10 buses and 25 trucks on the tour. Hopefully, we don't ever see prices jump like they did during the 1973 OPEC embargo, when the cost of a barrel of oil increased 400 percent in 12 months, says. I'm glad we're not having that discussion."
Even if prices do spike, Erickson says, "Contingency expenses are built into tour budgets to help hedge against variable fuel costs."
An edited version of this article was first published in the Jan. 24 issue of Billboard.