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Archive for Sunday, August 19, 1990

LOCAL OFFICIALS BRACE FOR FUEL COST CRUNCH

August 19, 1990

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Despite recent jumps in the price of gasoline, spokesmen for businesses and governments in Douglas County say recent events in the Middle East have yet to take a toll on their costs for fuel and petroleum-based products.

But a surge in costs seems likely and businessmen and local officials are unsure how to brace themselves.

"At a staff meeting the city manager informed us to be aware of cost increases, and that we have to live with our budgets," said Julia Karr, the city's director of finance. "If the price goes up, something else will have to go. But I don't know what that will be."

Already, Karr has seen the economic ripple effect from the Iraqi invasion of Kuwait. On July 16, she said the low bid price of a gallon of unleaded gasoline, excluding tax, was 63.2 cents. On Aug. 13, the low bid price was 83.9 cents, or a difference of 20.7 cents per gallon.

THE CITY'S July fuel consumption for its fleet of 301 vehicles, which includes cars, trucks, fire engines, tractors and mowers, was 24,700 gallons, Karr said. Unleaded gasoline consumption accounted for 10,546 gallons during that time.

Therefore, if fuel usage stays the same for August, the overall cost of unleaded gasoline would be $2,183 more than in July.

John Dixon, the county's director of purchasing and accounting, said he also saw a 20-cent increase in fuel bids from July to August. The county uses 8,085 gallons of gasoline and 2,000 gallons of diesel per month for its 77 vehicles, he said.

At Kansas University, Mike Richardson, interim director of facilities operations, said he was unsure of what the full impact from the rising fuel costs would be on his department's 450 vehicles which consume from 16,000 to 20,000 gallons of diesel and gasoline each month.

"We're concerned, but we have to temper that with the uncertainty in the Middle East," he said. "We're subject to the same price fluctuations that any market is."

RICHARDSON said he has seen increases of only five cents per gallon in his department's last two bids.

Rodger Oroke, director of support services at KU, recalled that the University curtailed the use of police patrol cars, grounds equipment and service vehicles the last time a fuel crisis existed. The same cutbacks could recur, he said.

"If there are further increases we will take the necessary measures, as best we can, to conserve," Oroke said.

Another area of concern for KU is its heating fuel supply costs for the winter. Although the university uses natural gas for heat, its price could increase because of higher demand brought on by higher oil prices. Richardson said the next contract for natural gas would be in September.

THE EARLY indication from Lawrence manufacturing companies that use oil by-products is that the Middle East situation hasn't prompted sudden increases in costs.

"It has not had an immediate effect on our operation, but I'm sure it is going to have an effect," said Eric Walther, spokesman for Packer Plastics, 2330 Packer.

The company manufactures a line of food containers. It also supplies plastic cups sold by professional sports franchises and by Kansas University.

"Anytime there's an oil crisis, there will be an effect on petro-related products. Historically, there has been that relationship," Walther said.

He said much of the plastic used by the company is derived from natural gas, but other components are derived in the oil cracking (refining) process.

BILL MATTESON, Farmland Industries vice president, said the conflict could affect Farmland's Lawrence plant, which uses natural gas to make fertilizer.

"A lot of natural gas does come in from the Mideast, so there would be potentially some impact at some point," he said. "But I don't think there has been any at this time.

"Crude oil prices are up right now. We expect demand for refined products diesel, gasoline and propane, all those things would be affected over time."

Roy Chaney, owner of Chaney Plumbing, 930 E. 27th, said he hasn't observed fluctuations in the cost of petroleum-based piping used by plumbing companies.

"PVC pipe is a by-product of petroleum," he said. "A few years ago when the price of gas dropped a lot, it never really affected the price of PVC pipe."

Chaney said if a major oil shortage occurred it might raise the price of piping. But so far, he said, the only change the company has encountered has been at the gas pump.

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