Home Top Stories Fuel Costs: To Lock Down or Not is the Dilemma, and Gamble
Fuel Costs: To Lock Down or Not is the Dilemma, and Gamble PDF Print E-mail
Written by Stephane Babcock   
Monday, 11 July 2011 09:00

fuel-hedgingWhile fuel prices have abated somewhat the spring, the added costs have become another bump in the road that school district transportation departments and bus companies must deal with when keeping their buses on the road and students on board.

“As a nation, we need to push our government and auto industry for alternatives to fossil based fuels now, not later,” said Albert Francisco, transportation manager for Adams County School District 14 in Commerce City, Colo. He added that, if there was a chance to lock in fuel prices now under a contract, he would, especially since “fuel costs will only rise.”

But others were not as eager to lock in a specific price for fuel. Adam Johnson, director of transportation for Union County (N.C.) Public Schools, said the district spends about $25,000 monthly to fuel the fleet of 328 buses, with rising costs of fuel reducing the availability of funds to spend elsewhere in the transportation department.

“I would not lock in at the current price of fuel as I have seen fuel prices start the 2010-2011 school year over $2 per gallon, and then go as high as close to $4 per gallon after a few months. The market is not stable enough to warrant a lock-in price,” said Johnson, explaining that North Carolina allots a certain amount of funding for fuel, so he must always be mindful of fuel prices.

Union County students will have to walk a little farther to their bus stops next year, since the department is now in the process of creating cluster stops to cut down on route time and fuel usage. With fuel prices in a constant state of flux, Johnson said the only way to stay ahead of the game is to ensure his department is running as efficiently as possible.

“This is not an easy task with all of the demands that we face daily. Pupil transportation continues to sail through uncertain waters. I started my career 15 years ago, and have seen so many changes including finding new ways to do more with less,” added Johnson.

Sometimes all the costs you see on paper are not all the costs that actually exist. Jack Lee, chairman of 4Refuel Canada LP, a Canadian-owned distributor and manager of fuel supply, explained some of the hidden costs in a recent STN blog at www.stnonline.com/go/811. Some of the hidden costs include theft by employees topping off their own tanks, thieves siphoning fuel after hours, the cost to transport the fuel to your bus yard, and fuel waste due to idling, speeding and poor driver habits. Lee suggests first putting all the hidden costs together and using Web-based fuel reporting systems to control fuel costs, manage budgets and keep track of fuel efficiency.

“Some people consider not locking in or hedging your fuel cost a terrible gamble. I find that paying an investor so he can make money, no matter the cost of fuel, is not necessarily in the best interest of my district.”

— Allan Griffin, Jr., Humble (Texas) ISD

Location also plays a role in rising fuel costs. In rural parts of the country, the need for transportation can subject districts to unavoidable costs. Amparo Attebery, transportation program manager for Kings River-Hardwick School District in Hanford, Calif., said he was “way over budget” on his fuel costs since many of his rural students live too far away to walk to school. But, if necessary, he might have to resort to school policy and make some students walk farther to bus stops.

“I am trying to double up on routes where I can. I will be cutting one route into town in the morning and keeping my bus load up to capacity (84 students). That will help me [with about] 8 miles a day,” said Attebery, who would also stay away from locking in a price for fuel with the hope that it will begin to drop in the near future.

In Humble, Texas, one transportation professional is also not ready to take the bet when it comes to fuel costs.

“Some people consider not locking in or hedging your fuel cost a terrible gamble. I find that paying an investor so he can make money, no matter the cost of fuel, is not necessarily in the best interest of my district,” said Allan Griffin, Jr., assistant director of transportation at Humble ISD. “The premium you are required to pay to lock in prices might be a great thing, or you might get to the end of the budget year and realize you have paid more for every gallon of fuel you consumed that year.”

The district was in the process of adding 30 alternative-fuel buses, and it planned to reduce its reliance on diesel by running the new buses as much as possible and on the longest runs due to the lower cost per mile to operate. A final decision on which type of buses will be purchased was pending. In the meantime, Griffin said he was keeping a close eye on operations to keep costs down.

“I am trying to manage my fuel costs by choosing the most cost effective fuel and encouraging more fuel efficient operation of the vehicles. Fuel is a commodity and we have seen over the last several years that prices increase and decrease due to many variables,” added Griffin.

Reprinted from the July 2011 edition of School Transportation News. All rights reserved.

Last Updated on Friday, 15 July 2011 07:36