Archive for Wednesday, July 16, 2008

De Soto district looking to lock in diesel fuel price

As fuel prices cause concern to school districts developing 2008-2009 budgets, USD 232 is exploring an arrangement that would lock-in the cost of diesel for the next school year.

As fuel prices cause concern to school districts developing 2008-2009 budgets, USD 232 is exploring an arrangement that would lock-in the cost of diesel for the next school year.

July 16, 2008

The De Soto USD 232 Board of Education members are mulling over investing in a fuel commodities program that could potentially save the district money in a period of escalating oil prices.

District operations director Jack Deyoe presented information July 7 to the board on Constellation New Energy's fuel hedging program, which he said would allow the district to lock-in a target price for the year so that it can ensure a constant price for diesel fuel and avoid volatility spikes.

"We know pretty close from our history about how much fuel we will use," Deyoe said. "What we don't know, though, is if diesel fuel goes up into the $4 or $5 range with the quantities that we have. We could be out of budget by February for fuel."

Deyoe said rising fuel costs have been an issue as he tried to create a fuel budget for the 2008-09 school year.

"Back in January, we assumed that we could budget for $3.50 a gallon and get by," he said. "By April, that projection was completely shot out of the water, and I advised a change that budget projection to $4 a gallon."

And now, diesel is costing more than $4 a gallon.

Deyoe said if the board decided to go with the commodities market, the district would draw up the paperwork, but he would wait to enter the market until the fall when diesel prices likely would decline.

The largest risk involved in joining a commodities market is the chance for fuel prices to drop because the district would still have to pay for fuel at its locked in price and therefore wouldn't be able to take advantage of potential fuel savings.

"I'm not going to hedge any at $4.40," Deyoe said. "If it would drop to $4.05, I would feel strongly at getting at least 50 percent."

The board decided to wait on moving forward with the program, and will discuss it at its next meeting July 21.

"I think it would be good to get more information on this, it's an intriguing concept," Board member Jim Thomas said.

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