Over the last two fiscal years, the University spent over $9 million more than it planned on oil products, mostly because of steep rises in oil prices last winter.
In its 2001-02 budget, Yale has allotted more money toward oil expenditures and developed new measures to prevent the occurrence of huge deficits. With the oil market in a volatile state and in light of the unrest in the Middle East, however, University officials still acknowledge that they must monitor the situation carefully.
Yale must heat 10 million square feet of building space every year and spends about two percent of its total budget on utility costs.
Provost Alison Richard, Yale’s chief academic and financial officer, said she had some concerns about oil prices but thinks the University is in a better position now than it was last year.
“We believe that we have anticipated fuel prices aggressively, but it’s too soon to know if we got it right,” Richard said.
Last year, the University paid $19.8 million in fuel costs but had only allotted $12.1 million. This year Yale plans to spend $15.6 million.
Although this amount is still substantially lower than last year’s actual cost, it is unlikely that oil prices will soar as high as they did last winter. A limited supply of oil, a cold winter and the energy crisis in California combined to make oil prices seven to eight times higher than average by the end of the winter.
This year the supply of oil is far greater, which leads to lower prices. But to lessen the danger of serious losses, the University has hedged oil and gas prices in the futures market, Deputy Director of Facilities Roberto Meinrath said.
“The probability of things going worse is [significantly] higher than them getting better,” Meinrath said. “Therefore, overwhelmingly, it makes sense to consider hedging to protect the University against unforeseen events.”
Although supply is high, foreign and domestic security issues may make this a good year for the University to take measures to limit their losses. Factors like an extremely cold winter or serious problems in the Middle East could easily cause oil prices to rise.
But while some gas stations took advantage of the terrorist attacks of Sept. 11 and raised gas prices dramatically, Secretary of Energy Spencer Abraham said there should be no concern about supply or suppliers in the Middle East.
“Our supplies of oil and gas remain strong and stable, and the terrorist attacks appear to have had little or no adverse effects on them,” Abraham said in a Sept. 27 speech.
The University receives a weekly report from the Department of Energy and carefully observes any changes to oil prices.
“These are the best projections one gets,” Meinrath said. “It reflects readily any political uncertainty.”
But Meinrath said he will not be overly concerned about the future of oil prices.
“There’s absolutely no point in me getting concerned,” he said. “I don’t think anyone knows what might happen.”