AGENDA #1d
TO: W. Calvin Horton, Town Manager
FROM: Bruce Heflin, Public Works Director
SUBJECT: Biodiesel Use for the Town’s Vehicle and Heavy Equipment Fleet
DATE: April 2, 2003
This budget working paper provides information on the feasibility and cost of using B-20 biodiesel fuel as the primary fuel for the Town’s fleet of vehicles and heavy equipment.
On January 13, 2003, the Town Man ager presented an information paper to the Town Council regarding the feasibility and cost of using B-20 biodiesel for the Towns’ fleet. Key points from that report were:
Fuel prices have risen dramatically over the past few months. The price of low-sulphur diesel was $0.73 per gallon on November, 18, 2002; however, it rose to $1.24 per gallon on March 10, 2003. The price of B-20 biodiesel was $1.00 per gallon on November, 18, 2002; however, it rose to $1.37 per gallon on March 10, 2003. (Please see the graph at Attachment 1).
We budgeted $0.95 per gallon for fuel in FY 2002/03. At the current market prices, biodiesel fuel is not affordable within the budget and it will be necessary to conserve the fuel budget surplus from the first half of the fiscal year to cover the cost of the unexpected fuel price increases in the second half of the year. It appears to be unlikely that we will be able to begin using biodiesel fuel in FY 2002/03.
The recent volatility of the fuel market and the uncertainty over the international political situations in Venezuela and Iraq make it extremely difficult to forecast fuel prices with any degree of accuracy. In response to this uncertainty, we are presenting the Council with three options for arriving at a fuel budget. (Please see Attachment 2).
Option 1: Estimated cost of $1.05 per gallon for gasoline and diesel.
Option (1) is the most optimistic. It assumes that the international situation will be resolved soon and that oil prices will return to normal within a few months. This base budget option does not include any provision for the use of biodiesel fuel.
Option 2: Estimated cost of $1.05 per gallon for gasoline and $1.30 per gallon for biodiesel.
Option (2) adds the use of biodiesel for all Town vehicles that use diesel fuel. The additional cost associated with the addition of biodiesel is $20,900. This option is also somewhat optimistic, assuming that the international situation will be resolved soon and that oil prices will return to normal within a few months. One advantage of this option is that it provides some protection against the possibility of sustained higher oil prices. If oil prices remain high, we could defer the use of biodiesel and use the $20,900 allocated for that purpose to offset the high price of regular fuels.
Option 3: Estimated cost of $1.30 per gallon for gasoline, diesel and biodiesel.
Option (3) is the least optimistic. It assumes that the recent rise in oil prices will not be reversed in the near future. The additional cost associated with Option (3) is $53,600 over Option (1) and $32,700 over Option (2). Option (3) provides the highest probability that we will be able to use some biodiesel in FY 2003/04 and that we will be able to withstand the current increase in market prices within the amount budgeted. Since we cannot predict the magnitude or duration of the recent fuel price trend, this option should not be considered a “worst case” scenario budget. The use of biodiesel under this option is uncertain and depends on how high fuel prices eventually climb. It is possible that this option will not provide sufficient funding for the year and that a supplemental appropriation for fuel will be required at some time.
CONCLUSION
We will continue to pursue use of biodiesel fuel within the budget allocation available.
ATTACHMENT