Title
Establishment of a Fuels Hedging Program (B)
This item discusses a proposal for the establishment of a fuels hedging program.
Explanation
The City of Gainesville purchases a combined total of almost 1.8 million gallons of unleaded and diesel fuel each year to supply our fleet of cars, trucks and transit buses. The spike in fuel prices the nation experienced last year drove up fuel expense in just the General Fund by $970,000 or almost 29% for FY08.
The goal of a fuels hedging program is to minimize the price volatility associated with acquisition of the commodity. This is accomplished by assuming a financial position such as acquiring options to purchase fuel at a fixed price at some future date in order to offset the risk inherent in purchasing fuel on the spot market.
Fiscal Note
A properly structured fuels hedging program can potentially reduce overall fuels cost, but just as importantly can minimize price uncertainty and volatility resulting in costs that conform more closely to fuel budgets and forecasts.
Recommendation
The City Commission hear a presentation on the proposed fuel hedging program and authorize the City Manager to establish such a program.