Saint John transit gambles on diesel prices, saves $44,000 so far this year
Commission locked in price in December at 78.25 cents
Imagine if you had locked in the price of gas last December, and anything above that price gets reimbursed directly to you.
That's the enviable position the Saint John Transit Commission is in after hedging the price of diesel for its fleet of buses. They locked in at 78.25 cents per litre, explained Ian Fogan, the director of transit and fleet for the city of Saint John.
Normally, he said, some days will be higher, some days will be lower, "and usually it balances out."
"We've never seen the commodity price even at the level where we locked in," said Fogan.
And the price just kept climbing.
"It's never hit the level where we've had to pay them," he said.
In the first four months of 2022, the commission has gotten back more than $44,000. And as prices keep climbing, the reimbursements go up too.
When they were contemplating locking in last fall, Fogan said they were a little nervous about it because they weren't sure they would use as much fuel as they had estimated. After all, they're bringing in a few electric buses and launching some on-demand service.
The city has estimated that it will use approximately 480,000 litres. Based on that and the locked in price of 78.25 — which doesn't include all the taxes added to fuel — the commission budgeted $840,000 on fuel. That represents 10 per cent of its entire budget, said Fogan.
The Transit Commission has been hedging on the price of gas for the last five years, and Fogan said they've had a "positive experience" although it hasn't been "a huge money maker."
That changed this year, although the year is still young, and Fogan says anything can happen — that's the nature of the hedging game,
For transit commissions, hedging is more about building in stability and eliminating fluctuations in the market. That makes it easier to maintain service that doesn't follow fluctuating fuel prices, said Fogan.
Moncton transit does not hedge on fuel prices because it "only represents a small portion of our budget and we use other avenues to protect ourselves from major price fluctuations," said city spokesperson Austin Henderson.
"We have operating reserves that are set up for exactly that purpose, to protect us against cost variations."
The city of Fredericton was also asked whether transit officials hedge on bus fuel and to provide details if they do, but they did not provide those details by publication time.