Rising world oil prices have blown a million dollar hole in the budget of the Steamship Authority and forced the boat line to refigure its budget for a second time.

However, governors balked at management’s advice that they should immediately consider fare increases to cover the extra projected cost, opting instead to put off any revenue decisions until January.

If the price of oil remains high, governors will consider measures that include a fuel surcharge.

At their meeting last month boat line governors considered a $76 million draft budget that calculated fuel costs for the coming year based on a crude oil price of $70 a barrel. After that meeting the assumption was increased to $80. At the meeting on Tuesday this week, held in the Oak Bluffs library, governors told management to count on oil being $90 a barrel in the coming year, and warned it could go higher still.

Every $10 increase in the cost of a barrel of oil translates to about $1 million in additional fuel costs for the ferry service.

The boat line operates on a calendar year.

Steamship Authority general manager Wayne Lamson warned the failure to take steps to address the increased expense could have impacts on capital projects, including the second and third phases of the Oak Bluffs terminal reconstruction and the mid-life refurbishment of the ferry Nantucket.

This week, as at last month’s meeting, Falmouth governor Robert Marshall led the push to factor in higher oil prices.

Mr. Marshall noted that some prognosticators predicted oil prices would climb to $100 a barrel or more. On Tuesday prices were up around $87 or $88, pushing projected fuel costs up another $600,000 or $700,000 from a month ago.

But Mr. Marshall also cited the healthy surpluses the boat line enjoys and management’s success in cost cutting as reasons to defer any fare increases.

Barnstable governor Robert O’Brien said the boat line was “sticking its head in the sand” if it continued to assume $80.

“We should be looking at $90 and using our surplus to fund that,” Mr. O’Brien said.

Mr. Lamson argued that if the budget includes a projection of increased fuel costs, it should also include measures to cover it.

“We should also be proposing fare increases,” he said. “I think we should look at it right now.”

In January, the SSA will already have prepared brochures including all fares and early bookings will have begun, Mr. Lamson warned.

In contrast to their resistance to taking immediate steps to cover the latest blow out in fuel costs, the governors quickly approved $700,000 in fare increases on the Nantucket route, a planned increase after last month’s redrafting of the budget.

Nantucket governor H. Flint Ranney noted that even if the rate increase is not approved, the boat line still would have a $3 million surplus, but he said he could live with fare hikes of less than three per cent.

“I am regretfully going along with the rate increases that management is proposing,” Mr. Ranney said.

While the members wait to see what happens with the price of oil, boat line finances remain in good shape. The business summary for August continued this year’s run of strong results.

The number of passengers carried was up two per cent compared with last year, and the number of cars up one per cent. Net operating income for the year to date was $9.9 million, about $3.8 million more than forecast in last year’s budget.

In other business, the SSA foreshadowed noisy and possibly alarming activities at the Oak Bluffs terminal.

On Saturday, starting around 9:30 a.m., there will be a full-scale emergency drill, simulating a major fire aboard a ferry. There will be real (although nontoxic) smoke, some 40 firefighters and about a dozen ambulance officers, from Oak Bluffs, Edgartown and Tisbury.

Also over coming weeks, piles will be driven for the first phase of the reconstruction of the Oak Bluffs terminal. SSA director of engineering Carl Walker said workers will soon begin demolition of parts of the old structure. Several old dolphins at the pier would be demolished, possibly using explosives.

The governors also approved new operating schedules for next year, and a new policy relating to fares for military personnel stationed here, even if their vehicles are not registered here and their driver’s licenses do not show Island addresses.

In the future, they will be entitled to travel at excursion rates.