FARGO (KFGO) – Like most local governments, the city of Fargo has a large operating cost for its fleet of vehicles. The spike in fuel prices has not helped. But Fargo has avoided the unexpected record high prices by pre-buying the fuel a half-year in advance, saving thousands, even millions of dollars.
Public Works Director Ben Dow says the city goes on the open market and calls on vendors that buy and sell large amounts of fuel. The city then purchases the large blocks of fuel locked in at a discounted rate. It’s much the same way many airlines buy their fuel futures. Fargo has been using the process for 11 years.
Last year, the city saved almost a million dollars, and this year Dow expects the city will save almost two million dollars on fuel costs. The city is now paying about $2.72 a gallon for diesel and $2.40 for unleaded. On an annual basis, the city buys about 480,000 gallons of diesel fuel and 300,000 gallons of unleaded gas.
He says it avoids unexpected or rapid inflation in an effort to save taxpayer dollars. Dow says Fargo guarantees 80% of its city fuel purchases with the contract. If the market should drop, he says there’s still the ability to purchase additional fuel on the open market. In the past, city savings have ranged from $50,000 to $100,000 annually.
He says it took a long time to get comfortable with the pre-buy, with lots of data collected to track the trends and watch the “barrel price” for the futures in the next quarters.
Dow says the city has already bid its fuel for the first and second quarters of 2023 and did see an uptick in the price which was to be expected but he says Fargo will still be in “OK shape.”
