Fighting High Fuel Prices

At a time when escalating fuel prices continue to rock the construction industry, Colorado is considering a big cutback in drilling for oil and natural gas. Colorado Governor Bill Ritter has said he is trying to strike a balance between the energy needs of consumers and protecting Colorado's landscapes, water and air, public health, and wildlife. Although more public input will be forthcoming, new anti-drilling regulations are set to be in place later this year.

The Rocky Mountain News (March 31, 2008)has reported:

The new rules spring from legislation passed last year in the wake of concerns from hunters, landowners, local governments and environmental groups that the industry's rapid growth was damaging wildlife habitat, overwhelming public infrastructure, polluting the air, threatening water supplies and — in the view of those living in the gas fields — jeopardizing public health.

But the oil and gas industry says that a reduction in drilling will be expensive. A recent study by ICF International says if Colorado's drilling for oil and natural gas is reduced, U.S. consumers could pay some $32 billion for natural gas alone, over the next decade. (The entire ICF study can be reviewed at: www.americansforamericanenergy.com.)

Rocky Mountain Construction recently asked four Colorado contractors how high diesel and gasoline prices are affecting their profit margins, and what they are doing about it:

— What effects are high fuel prices having on your bottom line?

Significant.

— Compared to last year, what percentage of your costs is dedicated to fuel? (i.e., have fuel costs gone up 10 percent, 20 percent, or more?)

25 percent plus

— What are you paying as of June 10, 2008, per gallon of gasoline; per gallon of diesel?

$4.44

— What are you doing to conserve fuel? (Idling less? Seeking shorter routes to job sites? Re-powering engines? Etc. ...)

Staying focused on all aspects of operations

— Have you started paying more attention to equipment regarding fuel consumption?

Yes.

— What type of fuel savings are you realizing on a monthly basis by using fuel-efficient machines?

$2,500

— Has fuel consumption become more of a factor now versus the past when deciding to rent/purchase equipment?

Yes.

— What ideas do you have to end these price increases?

Open up the western slope, oil shale; they have only been talking about it for 30 years!

— What effects are high fuel prices having on your bottom line?

They are taking away profits on jobs already under contract that cannot be recouped.

— Compared to last year, what percentage of your costs is dedicated to fuel? (i.e., have fuel costs gone up 10 percent, 20 percent, or more?)

15 percent.

— What are you paying as of June 10, 2008, per gallon of gasoline; per gallon of diesel?

Diesel dyed @ $4.13 per gallon; diesel clear @ $4.57 per gallon

— What are you doing to conserve fuel? (Idling less? Seeking shorter routes to job sites? Re-powering engines? Etc. ...)

Consolidating truck trips/routes; using equipment more efficiently

— Have you started paying more attention to equipment regarding fuel consumption?

Yes.

— What type of fuel savings are you realizing on a monthly basis by using fuel-efficient machines?

10 percent to 20 percent, depending on the machine.

— Has fuel consumption become more of a factor now versus the past when deciding to rent/purchase equipment?

Yes.

— What effects are high fuel prices having on your bottom line?

We are experiencing severe financial issues due to the large geographic area we service.

— Compared to last year, what percentage of your costs are dedicated to fuel? (i.e., have fuel costs gone up 10 percent, 20 percent, or more?)

30 percent a year ago; 50 percent today — a 66-percent increase.

— What are you paying as of June 10, 2008, per gallon of gasoline; per gallon of diesel?

Gasoline: $3.85 Diesel: $4.79

— What are you doing to conserve fuel? (Idling less? Seeking shorter routes to job sites? Re-powering engines? Etc. ...)

Replacing inefficient machinery.

— Have you started paying more attention to equipment regarding fuel consumption?

Yes.

— What type of fuel savings are you realizing on a monthly basis by utilizing fuel-efficient machines?

25-percent savings.

— Has fuel consumption become more of a factor now versus the past when deciding to rent/purchase equipment?

Yes, it is in the top two or three factors.

— What ideas do you have to end these price increases?

Increase production.

— What effects are high fuel prices having on your bottom line?

Diesel fuel is 30 percent more than we had budgeted, and there seems to be no end in sight to how high it will go.

— What are you doing to conserve fuel? (Idling less? Seeking shorter routes to job sites? Re-powering engines? Etc. ...)

Idle time with every piece of equipment, from pickups to loaders, is under scrutiny constantly.

— Have you started paying more attention to equipment regarding fuel consumption?

Fuel economy is becoming a regular topic of discussion with operators and maintenance personnel. With the cost of fuel increasing at the current pace, it is a much more significant percentage of the overall operating cost.

— Has fuel consumption become more of a factor now versus the past when deciding to rent/purchase equipment?

Fuel consumption is of greater consideration when purchasing and maintaining equipment than any time in my career of over 30 years in the industry.

— What ideas do you have to end these price increases?

I am puzzled by the fact that diesel is 20 percent higher than gasoline when it is a well-known fact that it costs significantly less to refine diesel. Why is this?

We should eliminate ethanol and use the government subsidies now going to produce ethanol to incentivize the construction of nuclear power plants and explore cost-effective methods of producing energy from oil shale. Ethanol requires 1,500 gallons of water to produce just one gallon of ethanol. In addition, ethanol emits twice the amount of greenhouse gases as petroleum gasoline.

Environmental regulations should be relaxed to allow for the construction of oil refineries here in the U.S. The last refinery was built when Jimmy Carter was president.