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Fuel Hedging Program Saving Money

City Of Cincinnati's Fuel Hedging Program Saving Money & Controlling Costs

In order to safeguard the City against price volatility for fuel costs, Cincinnati City Manager Milton Dohoney, Jr. established a fuel hedging program at the end of 2011 to help control the costs of fuel for the City’s fleet.

Since 2007, the City has spent an average of $5.8 million annually on diesel and gasoline fuel from its General Fund budget. The price of diesel and gasoline had almost doubled since 2005, spiking dramatically in 2008, 2011, and again in 2012.

As of July 31, 2012, the hedging program has produced more than $200,000 in gains since the program began in 2011. While gas and oil prices were down earlier this year, the City entered into contracts to purchase fuel for 2013 to help ensure lower costs for next year.

"Our fuel hedging has allowed us to keep costs below budget while controlling our fuel costs for our entire fleet of vehicles," said City Manager Milton Dohoney, Jr. "This ultimately gives a level of certainty with pricing and helps us control our resources."

The program creates more predictability regarding annual fuel costs by stabilizing the rate the City will pay for fuel in advance of purchase and consumption If fuel prices go higher during the year, the City is spared from paying the higher cost. The city is working with the consulting firm of Linwood Capital, LLC to manage its fuel hedging program.

With more than 1800 vehicles using 2 million gallons of fuel each year, the City has also invested in propane, hybrid and electric alternative vehicles (approximately 25% of the City’s fleet), as well as instituted a no-idling policy to reduce its fuel consumption. With these fuel and operational efficiencies, the city has been able to save an additional 31,000 gallons of fuel.

The City will continue to utilize the fuel hedging program in 2013 and expand its alternative fuel initiative to further reduce the City’s fuel budget.