I’m happy when I can pump gas for less than $3 a gallon — but I have as much control over what I pay as a barnacle does over a battleship, and I know it.
But I fill up at places that smell like coffee by the side of the highway. If you buy fuel by the millions of gallons, you have a little more bargaining power.
The Capital District Transportation Authority this week locked in a price of $2.69 per gallon for low-sulphur diesel. (CDTA doesn’t pay the taxes private buyers must pay, one reason the price is lower than you and I pay.)
But what’s interesting is when CDTA will be paying that price — it’s locking it in for its 2017-2018 budget year, three years from now, and at a lower price than it’s paying today.
“This is the furthest we have gone out in hedging our fuel prices,” said David Stackrow, CDTA board chairman.
The deal is with Mirabito Energy Products of Binghamton, which has been a primary supplier for more than a decade and already has future contracts to supply CDTA through May 2017.
The deal was struck without competitive bidding, but authority staff said that’s justified because it’s in CDTA’s best interest to lock in a price now.
“Because prices change daily, it is in the best interest of CDTA to forego the lengthy competitive procurement process and lock in the pricing when it becomes cost-effective to do so,” according to a staff memo to the CDTA board.
CDTA is currently paying $3.10 per gallon; that will drop to $3.03 for 2015-2016, $2.87 in 2016-2017, and $2.69 in 2017-2018. All the fuel deals are with Mirabito, which CDTA said is the only fuel company willing to offer a future price guarantee.
They’re a good customer. The authority spends between $5 million and $6 million each year on diesel — or about 8.5 percent of the organization’s budget.
Perhaps Mirabito knows something the rest of us don’t. For sure, I’m not betting on fuel prices dropping lower.
Even if more oil is being produced in North America, the newly exploited shale and tar-sands oils from the Dakotas and Canada are far more expensive to extract from the ground than West Texas or Saudi crude — in
addition to being, as we have seen repeatedly at this point, more volatile.
From a management perspective, locking in a price three years ahead gives CDTA one cost it can control — one of the few.
CDTA’s contract with the Amalgamated Transit Workers runs out in June, and union membership recently overwhelmingly rejected a proposed deal. The sides have yet to return to the bargaining table, so future labor costs are the biggest unknown.
It looks like the authority will be dipping into reserve funds for $3.8 million to balance the budget that’s scheduled to take affect April 1. But raiding reserves isn’t a sustainable way to operate.
State operating aid is again expected to be flat in 2015-2016 — that’s even though CDTA is going to set a new ridership record this year.
But mass transit agencies across the country are always in the same boat — they require heavy public subsidies in order to be both affordable for customers and reliable enough to be a legitimate alternative to driving.
“To maintain service levels, we need more revenue and more funding,” said CDTA board member Norm Miller, chairman of the committee that develops the budget.
Unspoken, for now, is where more revenue might be found.