Transit agencies in America have experienced significant increases in fuel prices since 2004 (see Special Note E). Even though prices have recently decreased and are not presently exhibiting the volatility that characterized earlier changes, fuel expense continues to affect an agency’s ability to provide essential passenger services. Further, when economies begin to recover from the current recession, fuel prices are likely to continue to increase from current levels as overall travel demand increases. Therefore, it is important to develop purchasing strategies now that respond to potential future price variability to permit transit agencies to deal effectively with changes in the fuel market. Past significant fuel price increases have had a negative impact on transit system budgets, limiting resources available for expansion while making it difficult to maintain current operations. In addition, higher gasoline prices have contributed to increased demand for and dependency on public transit services. Increased demand for transit service creates a greater need for transit agencies to at least maintain current service levels. The current recession has exacerbated the problem as tax revenues supporting transit operations have declined. Given that transit agencies often have a limited ability to raise revenues, volatile fuel prices can have a significant impact on both near- and long-term planning. An effective response requires innovative fuel acquisition strategies as part of an overall service delivery plan. These strategies can incorporate the use of future contracts, derivatives, swap strategies, spot market, joint purchasing, and other options. Long-term fuel acquisition strategies must also recognize that transit agencies differ in size and ability to access federal, state, and local funding sources.
The objectives of this research are to (1) identify, define, and evaluate cost-effective fuel purchasing strategies that will benefit public transportation agencies of different sizes as fuel prices fluctuate and (2) prepare a guide to assist transit agencies through the fuel purchasing process. This guide should help transit agencies evaluate alternative approaches for purchasing fuel that maximizes their ability to control costs.