April 4, 2012

Fuel hedging saves Nashville transit $6.5M

A fuel-hedging program implemented in 2009 to offset rising gas prices has saved Metro Nashville and agency partners nearly $6.5 million in fuel purchases.

Fuel hedging is the practice by which large fuel-consuming companies enter into fuel pricing contracts to reduce their exposure to volatile and potentially rising fuel costs. The agencies participating in the program include Metro Schools, Metro Fleet and several regional partners such as the Nashville Metropolitan Transit Authority (MTA), the Regional Transportation Authority (RTA) and the City of Franklin.

Through February of the current fiscal year that ends June 30, 2012, the program has generated almost $2.4 million in savings for the five agencies with contract prices of $2.30 per gallon for diesel fuel and $2.11 for gas.

The first two years of the hedging program had contract prices of $1.88 per gallon for diesel and $1.82 for gas, which generated $632,811 in savings the first year and more than $3.4 million in the second year.

“With fuel costs rising, we have been able to save money by smartly contracting to purchase fuel for Metro vehicles and MTA buses at more favorable gas prices,” Mayor Karl Dean said. “The program has saved Metro an enormous amount of money and has been a great success. Fuel hedging is a great example of local government working effectively on behalf of taxpayers to save money and operate more efficiently.”

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