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Reeling agencies hit by rising fuel prices

Oct. 25, 2012 - 08:34PM   |  
By ANDY MEDICI   |   Comments
U.S. Postal Service mail delivery trucks sit idle at the Manassas Post Office in Virginia.
U.S. Postal Service mail delivery trucks sit idle at the Manassas Post Office in Virginia. (Karen Bleier / AFP via Getty Images)

Agencies already struggling with budget cuts are getting squeezed by higher fuel prices — to the tune of $6 billion in added costs in fiscal 2011, according to preliminary data from the Energy Department.

While fuel use increased by only about 1 percent from fiscal 2010 to 2011, agency spending rose 46 percent — from nearly $13 billion in 2010 to $19 billion in 2011. The biggest drivers of the increase in spending were the costs of gasoline, diesel and jet fuel.

The trend promises to continue, as gas prices have risen from an average $3.46 a gallon in October 2011 to $3.80 a gallon now — a 34-cent increase, according to the Energy Department.

Every one-penny increase in the cost of gas can add $7 million to the U.S. Postal Service’s annual fuel costs, according to the agency.

Tom Day, chief sustainability officer at the Postal Service, said the agency will be about $150 million over budget for its fuel costs in fiscal 2012 — adding to an already sizable shortfall.

The agency is squeezed by higher fuel prices even as the number of addresses it delivers to is estimated to increase by 800,000 in fiscal 2013, Day said.

“We try to be as efficient as possible in our structure and our routes, but we have to deliver to every address in America six days a week,” he said.

The agency is working to increase its bulk fuel purchases to help reduce overall costs, and it has restructured its delivery routes to be more efficient, he said.

Part of the problem is an aging postal fleet that gets only about 9 miles per gallon on average, according to Day. Replacing the entire fleet could cut fuel costs in half, to about $250 million a year — but would cost about $5 billion.

The Defense Department also is working to counteract rising fuel prices. For every $1 increase in the price of a barrel of oil, DoD incurs an additional $130 million in fuel costs a year.

Sharon Burke, assistant secretary of Defense for operational energy plans and programs, said in June that Air Mobility Command, for example, is working to reduce aircraft weight and create more efficient routes with more efficient loading of cargo.

“That’s expected to save over a half-billion dollars over the next five years,” she said.

President Obama has directed agencies to purchase only alternative-fuel vehicles by 2015. Agencies must also meet federal mandates to reduce petroleum use by 15 percent from a 2005 baseline by 2015.

Federal spending on facility energy use climbed about $80 million, from $7.07 billion in fiscal 2010 to $7.15 billion in fiscal 2011 — about a 1 percent increase — despite overall use falling by almost 1 percent, according to the Energy Department’s preliminary fndings.

The 2007 Energy Independence and Security Act orders agencies to reduce energy use in their facilities by 30 percent from a 2005 baseline by 2015.

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