The purpose of this report is to show fuel prices paid miles driven, fuel mileage averages, and to determine if idle reduction and reduction in mile driven efforts have been affective

MEMORANDUM

City of Lawrence

Central Maintenance Garage

TO:	David L. Corliss, City Manager
FROM:	Steve Stewart, Fleet Manager
CC:	Chuck Soules, Director of Public Works Tammy Bennett, Assistant Director of Public Works
Date:	October 19, 2011
RE:	Parts and fuel price increases

The purpose of this memo is to advise you of the increases the garage has seen this year in parts prices. These increases have and will continue to impact all department maintenance budgets.

Fuel usage and miles driven:

Fuel usage is down in 2011 when compared to the same months of 2010 by 57,000 gallons. Miles driven has decreased by 99,000 miles. On vehicles using hour meters instead of miles usage has increased approximately 200 hours.

This reduction indicates the no idle policy and other vehicle use strategies implemented by the City are working.

Fuel pricing:

Even though City operations have reduced usage and conserved fuel the costs for January through September 2011 are $184,900.00 higher than the same time frame of 2010. Fuel prices have been significantly higher than the Department of Energy forecasts were when we developed the 2011 budget. Even though pump prices have dropped lately they are still $.25 cents higher per gallon than the 2010 forecast.

Current information from the Department of Energy indicates gasoline prices will track crude oil prices with regular gasoline costing 34 cents per gallon more than last winter.

Tire prices:

The second largest cost to fleet operations behind gasoline is tire replacement. We have become accustom to one to two price increases a year for the last several years. This is because of the ever increasing cost of natural rubber on the world market. In most cases these increases have been in the 5-8% range each time. This year’s increases have been numerous. The following example (Goodyear) is used because historically they have supplied the most OEM and City tires.

Titan International Inc. raised farm tire prices for the third time this year. Titan and Goodyear Tire & Rubber Co. raised prices up to 8% on all its replacement tire brands, retreaded tires and tread rubber on Sept. 1.

Goodyear Tire & Rubber Co. raised prices on all its replacement consumer tires in the U.S. and Canada, up to 5%, effective Oct. 1 (it included associate and private brands).

Goodyear North American Tire has announced it will increase prices of all its brands of commercial tires, retreads and tread rubber by up to 10% effective Nov. 1, 2011. The price increase applies to the U.S. only.

This is only one example all tire manufacturers are raising prices because they can no longer absorb the raw material cost increases as they have in the past.

The maintenance garage bids or quotes all tire purchases to assure the best pricing. We also use state and federal contract pricing in the past these have been very stable however this year these prices have also been subject to change.

Steel and aluminum pricing:

Steel and aluminum raw materials prices have been rising for past three years. Some analysts have reported as much as a twenty percent increase this year alone. Prices now seem to be leveling out or even falling but remain at or near record highs. The lag time between raw material purchase and sale of the manufactured goods has us continuing to deal with price increases. One example is the most cost effective brake rotor for patrol cars will increase ten percent this week. Other examples are one commonly used hydraulic cylinder has increased $425.00 in the past four years a heavy duty alternator increased slowly from 2008 through 2010 but increased 10% in 2011.

Summary:

Price increases for repair parts have been dramatic in the past year and indications are they will continue to impact everyone budgets through most of 2012.

Action Requested:

This memo is informative only no action is required at this time.