The unpredictable cost of doing business as gas prices rise

For John Q. and Mary Citizen who fill the tank of the family SUV or compact car to get to work and take care of day-to-day errands, the recent upswing in gas prices has put a serious dent in the family budget.

Imagine, then, the impact of higher fuel costs on school districts whose thirsty buses gulp thousands of gallons of diesel. Consider, too, what a municipality or fire protection district must deal with to make sure that first responder vehicles, along with cars and trucks vital to other services, keep rolling.

The only good news is that many government entities have access to, and use, tools that help them manage volatile fuel costs. No, such practices don’t put a permanent lid on energy prices, but they do help, especially in the short run. This year, Mother Nature also has assisted.

According to Manchester Mayor David Willson, the city purchases its fuel as part of a cooperative buying effort managed by St. Louis County. These volume purchases provide at least some break on prices for participating governmental entities but they don’t erase the upward trend.

“We’ve been lucky so far because the mild winter has meant we haven’t run our snow plowing and salt application equipment as much, and we’ve saved money there,” Willson observed.

“As a smaller community, we don’t have near the number of miles of streets and roads to maintain and patrol as some of our larger neighboring cities,” he said.

In addition, city employees are consolidating trips for parts and supplies and using an extended cab pickup truck for transporting workers to job sites close to each other, rather than taking two vehicles, Willson noted.

“There are some areas where it’s very difficult to save fuel,” the mayor continued. “The parks department has to keep the grass mowed and people want to see our police officers on the streets and patrolling in the subdivisions.” 

Chesterfield, with 200 miles of roads, also uses the wholesale buying effort headed by the county, according to Michael Herring, city administrator.

Among other things, the city has gone to more fuel-efficient cars for its police department, has asked officers to turn off the engine whenever possible instead of letting it idle, and is making an extra effort to maintain vehicles for the best possible mileage. Converting vehicles to compressed natural gas is another option now being investigated.

Chesterfield’s 2012 budget anticipated higher gasoline and diesel prices and includes a 14-percent boost in those expenditures, compared with 2011.

To combat rising gas prices, the Rockwood School District participates with a number of other area school districts in a hedge program available through Bank of America. Covering about half of Rockwood’s fuel needs, the plan is designed to control costs and is not a speculative venture, said Bill Sloan, director of purchasing and transportation.

Given the recent sharp increase in fuel prices, the program has proven its value. This year the district’s hedged price for diesel – agreed on months ago – is running well below the current market level.

For the fuel volume not included in the hedging program, Rockwood seeks bids, usually submitted based on an amount above an industry index price that fluctuates during the year.

Sloan says the district keeps a close eye on bus routes and the riders on each because usage often changes during the year.

“Tweaking routes here and there can save a lot of miles,” Sloan said. “And when you’re talking about large vehicles that get about six miles per gallon, the savings add up quickly.” 

Rockwood’s fuel expenses will total about $1 million this year, an expense that includes not only bus usage but also what’s burned by pick-up trucks, grounds crew equipment and other vehicles the district operates. Rockwood doesn’t own the buses used on its routes, but does pay for the fuel consumed.

Chief Vincent Loyal of the Metro West Fire Protection District says that organization projects “a worst-case scenario” when budgeting fuel costs to avoid any impact on its services if prices rise quickly and unexpectedly. Funds not used are held for the following year.

Beyond that, Metro West has “applied common sense approaches, much like we all do at home, to save everywhere we possibly can,” Loyal said.

Steps the district has taken include reducing vehicle travel to its headquarters location for meetings and supplies, more training at the station level, and purchase of more fuel-efficient fire and emergency medical vehicles. Command cars also are purchased with flex-fuel systems that help the district take advantage of the best possible fuel buys.

Metro West’s fuel usage for all its vehicles in 2011 was more than 37,000 gallons. Of the district’s $14.5 million operating budget in 2012, $150,000 is earmarked for fuel.