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Published in Print: March 15, 2000, as School Districts Contending With Increased Fuel Costs

School Districts Contending With Increased Fuel Costs

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More than 200 independent truck drivers drove their rigs from New Jersey to Washington late last month to protest soaring fuel prices.

Could school buses be next?

"There's definitely been an impact" on school transportation budgets from the recent increases in the cost of fuel, according to Bill Koch, the president of communications for Laidlaw Education Services in Naperville, Ill.

"We have a certain degree of exposure," said Mr. Koch, whose company operates a fleet of 40,000 buses for 1,200 school districts in the United States and Canada. "We have the opportunity, since we use large volumes [of fuel], to get significant amounts under contract to lock in prices. Then there are times when we are under contract with a school district where they provide gas. But on other contracts, we face the same challenge that normal consumers do."

Almost a year ago, members of the Organization of Petroleum Exporting Countries decided to cut oil production by 4.3 million barrels a day after world oil prices took a dive because of oversupply. Prices have skyrocketed, from $10.72 a barrel in December 1998 to the current average of about $30 a barrel on the New York Mercantile Exchange. The average cost per barrel imported into the U.S. and delivered to U.S. refineries is expected to increase from $26.65 per barrel in the first quarter of 2000 to $27.65 per barrel in the second quarter this year, according to the Energy Information Administration, a branch of the U.S. Department of Energy.

Over a Barrel

Dan Hargraves, the vehicle-maintenance manager for the Cajon Valley Union district near San Diego, said that small school districts are hurting most from the escalating gas prices. Mr. Hargraves oversees the operation of 43 buses that transport 2,200 students a day.

"San Diego Unified, for example, is buying in such huge volumes that they can probably shop around to get good deals with oil companies, but we don't have that luxury," Mr. Hargraves said. "If fuel gets up to $2 or $2.50 a gallon, we would have to think about cutting field trips and developing other alternatives to slow down our use of fuel." U.S. Secretary of Energy Bill Richardson has predicted that prices at the gas pump may peak at $1.80 a gallon, but will not reach $2.

Last year, the Cajon Valley Union schools spent $130,000 to pay for an average of 1,000 gallons of fuel consumption each month. This year, the district is on pace to exceed its current budget, despite adding $15,000 to cover expected gas increases.

Eighty-five percent of Mr. Hargraves' fleet operates on diesel fuel. Diesel prices in Cajon Valley began at $1.49 a gallon in September and have risen to $1.66 a gallon.

The news isn't discouraging everywhere. The Milwaukee school system provides daily transportation on yellow buses for 54,500 students. But the district—for now—isn't feeling the effects of high gas prices, since 17 contracting companies provide vehicles for its fleet of 1,350 buses.

"We have contracts with our bus companies where we pay a flat fee in the beginning of the year," said Susan Ramstack, the manager of transportation services for the school system. "The high prices might affect consideration when we negotiate next year."

Intervention Needed?

But higher gas prices will cost Florida's Miami-Dade County school system about $1 million this year, according to Deputy Superintendent Henry C. Fraind.

Miami-Dade, the nation's fourth-largest school district, also has the fourth-largest school bus fleet, according to School Bus Fleet magazine. (By comparison, New York City has the largest fleet at 5,066 buses, but establishes fees at the beginning of year, similar to Milwaukee.)

"Our fleet is larger than the county's bus fleet for general transportation, and we are not padding the numbers," Mr. Fraind said. "I think the U.S. Congress and President Clinton need to step in. This money could be used for educational purposes. Now we have to put it down the tanks of our buses."

The Clinton administration is awaiting the outcome of OPEC's meeting March 27 in Vienna before deciding whether to release some of the United States' oil reserves, Secretary Richardson told a congressional committee last week.

The EIA forecast last week that relief may not be in sight. The agency expects that gas prices—at an average of $1.50 for a gallon of regular throughout the nation as of March 6—will rise a minimum of 20 cents through May and June. It predicts that price increases will occur even if OPEC decides to increase production.

Mr. Koch's Laidlaw Education Services and other school transportation providers have no choice but to grin and bear the higher costs. Some are hoping future gas increases won't show up until the summer.

"I heard prices might go up again later this spring, and that might make commuters mad," Mr. Koch said.

"But it will be a good thing for us, and school districts in general, because come the middle of May and the first part of June, most fleets won't have to burn gas at all, since school will be out for the summer," he said.

Vol. 19, Issue 27, Page 12

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