CTA Struggles With Gas Payments Even As Ridership Rises

By Marcus Gilmer in News on Mar 9, 2009 4:40PM

A report that public transit ridership across the nation is at its highest level in 52 years shouldn't come as a surprise to anyone here in Chicago as it reflects the continued rise in local transit use with the CTA, Metra, and PACE. According to a survey by the American Public Transportation Association, Americans took 10.7 billion public transit trips in 2008, a four percent increase over 2007.

That's all well and good, but even as ridership increases, the strain on transit agencies' finances is also increasing. In the wake of fare increases and ginormous budget holes comes news that the CTA is currently overpaying for fuel to the tune of $1.51 per gallon. The agency locked in the price it pays for fuel at a cost of $3.80 per gallon but the recent decline in fuel prices has left market prices for diesel fuel at $2.29 per gallon. The CTA hired Massachusetts-based energy services company Ameresco to help them figure out a deal last year. Some say the CTA got a raw deal.

"They hedged and they gambled and they lost," said Robert Paaswell, the former CTA head who runs the Transportation Research Center at City College of New York. "There will be other times when they hedge and gamble and win." But Paaswell said he would recommend hedges for three months of supply at a time, not a year...

"They made a bad deal, but you can see why they did it," said David Sykuta, head of the Illinois Petroleum Council. "They probably figured if they could lock in anything under four dollars they were miles ahead."

Others, noting diesel prices nearly topped $5 per gallon last summer, say the move made sense given the volatility of the market.

Considering the volatility of fuel prices, it was a bet worth taking, said Phil Flynn, senior market analyst at Alaron Trading Corp. in Chicago. Another war in the Middle East or a hurricane in the Gulf Coast could send prices soaring again. Oil producers could also decide to reduce supply.

"A year from now they may look like geniuses," said Flynn. "I don't criticize the CTA for doing this."

CTA Chairwoman Carole Brown said she has "no regrets" about the 2009 hedges because it reduces uncertainty in a crucial part of the agency's budget.

"We can't bargain shop for something as critical as fuel costs," said Brown. "Sometimes the lack of uncertainty is worth a lot."

The CTA's 2009 fuel budget is $102.8 million, up almost $13 million from last year, and have already locked in 2010's fuel budget at $112.1 million.