Guidebook for Evaluating Fuel Purchasing Strategies for Public Transit Agencies (2012) / Chapter Skim
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1 S e c t i o n 1 Energy is one of the largest and most variable costs for organizations that operate in the transportation sector. The importance of managing fuel price risk has grown in recent years as higher fuel prices have increased energy's share of overall costs and greater price volatility has made fuel costs increasingly difficult to predict.
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2 Guidebook for evaluating Fuel Purchasing Strategies for Public transit Agencies Source: SAIC, Energy Information Administration: http://www.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx? n=PET&s=RWTC&f=D 0 20 40 60 80 100 120 140 160 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 $ p er B ar re l Relative Stability Strong Upward Trend Extreme Spike & Crash Figure 1.1.
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introduction 3 of higher prices and greater volatility on public transit agencies is that it has made it increasingly difficult to predict energy costs over the course of a year. The overall result of these two effects is that the budgets of public transit agencies have grown increasingly uncertain.
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4 Guidebook for evaluating Fuel Purchasing Strategies for Public transit Agencies of diesel, distribution and marketing accounted for 12%, refining accounted for 9%, and crude oil accounted for 63%. The price component breakdown in Figure 1.3 outlines the three types of energy price risk (i.e., delivery, commodity, and tax risk)
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introduction 5 A lesser but not insignificant concern is delivery price risk. Delivery price risk is the risk that a local fuel distributor will charge a high and unreasonable margin price for fuel.
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6 Guidebook for evaluating Fuel Purchasing Strategies for Public transit Agencies Delivery price risk management strategies are discussed in Section 7 of this guidebook. These strategies are divided into three categories: long-term contracting, competition strategies, and market power strategies.
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