Bulk Fuel Procurement & Fuel Planning Guidance (2026)
AML strongly encourages communities to act immediately to secure their 2026 fuel supply and financing, as delays significantly increase the risk of limited availability, higher costs, and severe delivery disruptions. Early procurement and contingency planning are essential to avoid potentially catastrophic impacts on operations and public services.
Purpose:
This memo provides guidance to Alaska communities as they plan for bulk fuel purchases, fleet operations, and broader fuel-related needs for the 2026 season. Based on recent briefings with fuel suppliers, regional stakeholders, and state and federal partners, this year presents a combination of risks that are more severe than typical conditions.
Communities are facing a convergence of global supply constraints, rising transportation costs, limited regional inventories, and increasing uncertainty in delivery timing. Taken together, these conditions require earlier decision-making, stronger coordination, and more proactive financial planning than in prior years.
Read more about the impacts of rising fuel costs on Alaskan villages here.
Overview of Current Conditions:
Fuel markets serving Alaska are currently under significant pressure. Global supply has tightened due to geopolitical instability and export restrictions in key Pacific Rim countries, leaving fewer available sources for Alaska-bound fuel. At the same time, regional refinery capacity is temporarily reduced due to scheduled maintenance, further constraining supply at a critical moment in the procurement cycle.
Transportation is also a major driver of increased costs and risk. Ocean shipping rates have risen sharply—reportedly up to three times higher than last year—and challenging ice conditions in the Bering Strait may delay deliveries by several weeks. In river-dependent communities, particularly in Western Alaska, low water levels following breakup may limit or entirely prevent barge access in some locations.
Compounding these challenges, fuel distributors report that inventories carried over from the winter are lower than usual due to higher seasonal demand. This reduces the ability to buffer current purchases with lower-cost fuel from prior periods.
These conditions highlight a broader structural issue: most rural Alaska communities rely on a single annual fuel delivery, typically occurring during a narrow summer window. This system leaves communities highly exposed to both price volatility and logistical disruption, as procurement decisions made now will determine fuel availability and cost for the entire year.Pricing Considerations:
Fuel pricing in rural Alaska reflects both global market dynamics and regional logistics. Communities should be aware that spring fuel deliveries are often priced using a blended approach, combining fuel purchased in prior seasons with current market purchases. While this is intended to spread costs over time, it can result in higher-than-expected prices during periods of rapid market increases.
In addition, most suppliers use a 30-day average pricing model rather than daily or spot pricing. This approach helps reduce exposure to short-term price spikes but also limits the ability of buyers to benefit from brief market dips. As a result, strategies focused on timing the market—such as delaying orders in hopes of lower prices—are unlikely to produce meaningful savings.
More importantly, suppliers have emphasized that delaying orders introduces a much greater risk: the possibility that fuel may not be available at all.
Procurement Strategy:
The most consistent message from suppliers and partners is that communities should act immediately to secure their fuel supply for the coming year. While it may be tempting to wait for prices to stabilize or decline, current conditions suggest that supply constraints will persist through the delivery season.
Communities that delay placing orders risk encountering capacity limits from suppliers, who may be unable to accept late requests once logistics and supply chains are committed. In such cases, fuel may only be available at regional hubs such as Nome, Bethel, or Kotzebue, requiring communities to arrange additional transportation at significantly higher cost.
In the most severe scenarios, communities that do not secure fuel early may be forced to rely on air delivery. This option is not only substantially more expensive but also less reliable, particularly given competing demand and limited aircraft availability. As one supplier noted, waiting until later in the season could lead to “economic disaster” if fuel cannot be delivered in time.
In light of these risks, communities should reassess their anticipated fuel needs, including operational requirements for utilities, public facilities, and transportation fleets. Where possible, communities may also consider building additional buffers into their orders, particularly if storage capacity allows.
Financing and Affordability:
Higher fuel prices are likely to strain local government budgets and utility finances. The State of Alaska’s Bulk Fuel Revolving Loan Fund remains a critical tool for managing these costs. Communities are encouraged to apply as soon as possible, even if final prices are not yet known, as loan amounts can be adjusted once pricing is confirmed.
At the same time, stakeholders have emphasized the need for flexibility in financing terms given the scale of anticipated cost increases. In particular, there is growing support for extending repayment periods or creating a mechanism to spread a portion of this year’s higher costs over a longer timeframe.
Communities may also need to coordinate with energy assistance programs, such as LIHEAP, to help offset the impact of higher heating costs on residents during the upcoming winter.
Operational Impacts:
The expected increase in fuel costs will affect nearly every aspect of local government operations. For municipal fleets, higher fuel prices will translate directly into increased operating costs for public works, emergency services, and transportation systems. Communities may need to evaluate opportunities to reduce non-essential travel, improve routing efficiency, and prioritize critical services.
Utilities will face similar pressures, as fuel costs drive both electricity generation and heating expenses. This may result in higher rates for customers and increased financial strain on utility operators. Communities should anticipate the need for rate adjustments and enhanced communication with residents about cost impacts.
Capital projects are also likely to be affected. Rising fuel and transportation costs will increase contractor expenses, potentially leading to higher bids, project delays, or the need to revise project scopes. Communities should incorporate additional contingencies into project planning and be prepared for cost escalation.
Finally, sustained high fuel prices may have impacts on the maintenance and condition of bulk fuel infrastructure itself. When operating budgets are constrained, routine maintenance and repairs may be deferred, increasing the risk of system failures over time.
Contingency Planning:
Given the uncertainty surrounding both supply and delivery, communities should prepare for multiple contingency scenarios. These include delayed barge deliveries, limited access to river communities, and the possibility that fuel may need to be staged at regional hubs rather than delivered directly.
In such cases, communities may need to coordinate additional transportation, including air delivery, which carries significant cost and logistical complexity. While discussions are ongoing about potential state involvement in staging emergency fuel supplies, no formal commitments have been made, and communities should not rely on this as a primary strategy.
Recommended Action Steps for State, Federal, and Other Partners:
Communities will need your assistance getting through these upcoming challenges! AML recommends that our partners take the following steps to support municipalities:
- Provide financial and technical support. Communities will need your support for ongoing operations and maintenance while budgets are constrained.This could also potentially include technical assistance to support operational best practices.
- Develop a plan now for emergency fuel purchasing assistance. Communities may need to purchase emergency fuel next winter (or earlier) if supplies run out and fuel needs to be transported in.
- Expand the Bulk Fuel Loan cap of $750,000 and ensure appropriate capitalization of the fund.
Conclusion:
The 2026 fuel season presents a combination of risks that are both immediate and significant. While higher prices are a major concern, the more critical issue for many communities may be ensuring that fuel is available at all. Early action will be essential. Communities that move quickly to secure supply, arrange financing, and plan for contingencies will be in a much stronger position to manage the challenges ahead. Those that delay may face limited options, higher costs, and increased uncertainty as the delivery season progresses. AML will continue to monitor conditions and coordinate with partners to provide updates and support. In the meantime, members are encouraged to take proactive steps now to secure fuel supply and prepare for the year ahead.