News
The Regional Transportation District that serves Boulder and Denver, Colo. is finding that the money-saving tactic that has served them well for years -- "locking in" a fixed price for fuel -- is costing them money while the price is low. However, even assuming the price stays low, they're going to come in within their budget because they budgeted for $4 gas and are paying $3.10.
[The major characteristic of a peak or plateau in oil supply is uncertainty in prices: they may spike one month and plummet the next as the many above and below-ground factors influence prices. Uncertainty means that there will be times when a tactic like fixing in a price for fuel backfires -- but the RTD spokesman is probably right that this is the right tactic for them in the longer term.
This is an EXCERPT: read the whole article here. -Ed.]
By Kevin Flynn
Fuel prices have tumbled, but while drivers are saving a hefty sum, RTD [the Denver and Boulder Regional Transportation District] is losing money for every penny the price falls.
That's because for the past several years, the transit agency has "locked in" a fixed price for diesel fuel to feed its bus fleet to stabilize its budget against the spikes in the world oil market.
The strategy has saved RTD - and its taxpayers - millions of dollars. But with the steep drop in oil prices in the past two months, RTD is paying the equivalent of 87 cents a gallon more than current pump price. The price locked in for 2009 is 77 cents higher than the current Denver diesel price average.
If that difference were to hold all next year, RTD would end up paying $4.6 million more than the market price.
RTD knew that its strategy would mean sometimes you win, sometimes you lose. And being on the plus-side of the deal since 2003, it has saved a total of $5.47 million over six years.
