How Much Does the Pentagon Pay for a Gallon of Gas?

For most people, answering the question, “How much does it cost to fill up your gas tank?” is a no-brainer. The average driver knows how much he or she pays for fuel.

That is not the case at the Department of Defense.

The Defense Logistics Agency buys military fuel for $2.82 per gallon. But that same fuel can cost $13 if it’s shipped by ground to a forward-deployed location, during peacetime. If it’s transferred in-flight from a refueling airplane to another aircraft, the gas is $42. If troops are in hostile areas, prices can range from $100 to $600 for “in theater” delivery. The Army estimated fuel can cost up to $400 a gallon if the only way to ship it is via helicopters.

These wildly divergent estimates illustrate the formidable undertaking of calculating precisely the price of military fuel. Pentagon officials have been trying to figure this out for years, but have yet to come up with easy answers.

During the past decade, two Defense Science Board studies have criticized the Pentagon for not having reliable methods of measuring what is known as the “fully burdened” cost of fuel, or FBCF. But the issue drew attention only when oil prices shot up to $140 a barrel in 2008 and the Pentagon’s fuel bill soared dramatically.

The DSB studies also urged the Pentagon to consider how much energy a weapon system requires before military buyers decide to acquire it. It should do so not necessarily out of concern for fuel prices, but because energy demands can significantly alter the course of a military operation, and even increase the chances of failing to accomplish a mission.

The military’s energy dependence turned into a larger-than-expected liability after the invasion of Iraq, when insurgents started blowing up fuel convoys with roadside bombs. That required the military to deploy more troops and hardware just to protect the supply lines. In 2006, the fuel problem moved to the front burner after commanders in Iraq were quoted in news media asking the Defense Department for help freeing troops from the “tether” of fuel.

In Afghanistan, the tyranny of fuel continues. Not only are U.S. forces exposed to roadside bombs, but commanders are also being exceedingly taxed by the lack of infrastructure to move things. “Next to Antarctica, Afghanistan is probably the most incommodious place to be trying to fight a war,” said Undersecretary of Defense for Acquisition, Technology and Logistics Ashton Carter. “It’s landlocked, rugged, [and] the road network is much thinner than Iraq and it has fewer airports,” he said at a news conference last fall.

Despite greater awareness of how dependence on energy has become a drag on military operations, doing something about it remains a tough challenge for the Defense Department. The Pentagon in recent years has publicized with great fanfare how it has reduced energy demand at its U.S.-based facilities. But that is only a small part of the equation. Seventy-five percent of the Defense Department’s energy is spent on operations and transportation.

The military’s energy predicament is not unlike the one confronting the United States as it tries to reduce its dependence on foreign oil. The fact remains that the nation’s economic model still assumes that energy will be plentiful and cheap. The military for decades has operated under that same assumption, and cannot turn the proverbial aircraft carrier on a dime.

The Pentagon devours 300,000 barrels of oil daily — about 1.5 percent of total U.S. consumption of 21 million barrels a day.

“Historically, the Department has treated energy, whether from petroleum-based fuels or electricity, as a cheap commodity, reliably supplied by our highly professional and capable logistics community, via our air tankers, our tanker trucks, our Navy oilers and our installation engineers,” Christopher DiPetto, director of developmental testing at the office of the secretary of defense, told Congress in 2008. “Stated more simply, our force planning processes almost always plug fuel logistics in at the back end, after the capability we want is designed. The result is that we plan capabilities and systems ignorant to the combat support ‘tail’ we are creating,” he said. “That has negative implications for the total force, as well as for the platform or unit we’ve designed for the ‘tooth.’ … Finally, we have little to no analysis on which to determine what it’s worth to the larger force to invest in fuel efficiency technologies.”

DiPetto said last month that the Pentagon has taken steps to enforce existing rules that require weapons systems to be evaluated based on how much energy they demand, and on how those energy needs may affect the likelihood of success in a military operation. The measuring method is known as “energy KPP,” or key performance parameter.

The panel of senior military officers that oversees weapons procurement — the Joint Requirements Oversight Council — approved the energy KPP policy three years ago, but the rule hasn’t been enforced, DiPetto said at a February conference hosted by the American Society of Naval Engineers. Officials from DiPetto’s office have been working with the joint staff on specific guidelines to enforce not just the energy KPP but also a consistent method to measure the fully burdened cost of fuel.

“We’ll be happy when FBCF is used in acquisition programs,” DiPetto said.

The methodology for calculating the FBCF is still being deliberated, DiPetto added.

Briefing charts presented Nov. 30 to the Military Operations Research Society by a Defense Department official list seven steps to estimating the cost: The commodity cost of fuel; the primary fuel delivery asset; the depreciation cost of the fuel delivery asset; direct fuel infrastructure operations and recapitalization costs; indirect fuel infrastructure, environmental cost (such as carbon trading and hazardous waste control); and other scenario-specific costs such as convoy escort, force protection, regulatory compliance and contracting.

According to the charts, the costs of protecting the fuel supply chain are “expected to be the single largest element in future FBCF calculations.”

The Defense Acquisition University posted on its website a method for calculating fuel costs at https://acc.dau.mil/fbcfmethod.

The commandant of the Marine Corps, Gen. James Conway, has made headlines during the past several months when on repeated occasions he asked the Defense Department and the private sector to help lower the energy demands for marines in Afghanistan. He quoted the DSB report’s $400 a gallon estimate as compelling evidence that action is needed ASAP.

Several officials told National Defense that the fuel delivered to troops in Afghanistan most likely does not cost $400 a gallon, but probably much less. The Army is trying to come up with an accurate estimate, sources said.

Defense officials and members of Congress, however, credit Conway for raising awareness of the military’s energy conundrum.

The perception that energy efforts at the Pentagon lack centralized leadership prompted Congress to mandate — as part of the 2009 defense authorization bill — a new position in the building, the director of operational energy, informally nicknamed by insiders as the “dope.” The administration nominated energy analyst Sharon Burke to that post, but the Senate has yet to confirm her. In the meantime, the job is held by Alan R. Shaffer, principal deputy director of defense research and engineering.

Shaffer tapped veteran scientist and naval weapons engineer James Short to help set up the operational energy plans and programs.

“We’ve done a lot,” Short said in an interview. “Since 2006, we have done a good job moving out on the recommendations of the two DSB studies.”

Short noted that the military services on their own have launched energy-saving programs as they experience the burdens that fuel demands impose on the force.

“People are getting the message,” said Short. The goal is to influence the behavior not only of Defense Department planners but also of suppliers.

Once the energy KPP and FBCF policies take hold, the military services will become smarter about the impact of their buying decisions, Short said. The services also will be held accountable for how much of a logistics drain they create on the entire force.

“I always feel sorry for the Air Force,” Short said. “Half of our fuel use at the Defense Department is for jet fuel. So we immediately point our finger at the Air Force … Of course, we in the Navy conveniently forget that when we need gas in the air it’s the Air Force tanker that brings it to us.” That fuel burned by Navy jets, however, shows up on the Air Force’s books.

Short acknowledged that measuring the fully burdened cost of fuel is going to be frustrating because there are so many variables to take into account. Army data, for instance, show that the same vehicle consumes more or less fuel depending on who drives it. Experienced drivers who are gentle on the accelerator can be up to 35 percent more energy efficient than rookies.

The energy KPP and FBCF rules likely will not be applied the same way across the Defense Department, he noted. “Each of our military services has different business models. Each implements the same acquisition rules in different ways. It’s not always a one size fits all.”

The Army is developing a tool to estimate the FBCF for a supply convoy, based on different tactical scenarios, said Short. That level of analysis is more useful than a “theater-level” assessment that offers no clarity on the relative value of technology, design or doctrinal changes, he explained.

Energy and fuel metrics already are in place for two of the Army’s upcoming procurements — the Joint Light Tactical Vehicle and the Ground Combat Vehicle. “The Army is doing this without an OSD [office of the secretary of defense] hammer making them do it,” Short said.

OSD still will exercise oversight, he said. There is concern that the services are entering uncharted territory and may rush energy policies that eventually could backfire. “It’s the responsibility of OSD to help the services identify the unintended consequences” of their decisions, Short said.

Amory Lovins, chairman of the Rocky Mountain Institute and co-author of “Winning the Oil Endgame,” said it could take years to change the culture within the Defense Department, but the payoff would be huge. “We need leadership focus on getting attention in operations, force planning and platform designs,” he said in an interview. The emphasis on energy “has to flow from doctrine and strategy and end up in organizational structure, training, reward systems.”

In the near term, officials said, the emphasis should be to try to reduce the energy demand of existing equipment, particularly in Afghanistan.

“There’s a heck of a lot more need on the operational side than the installation side,” said Rear Adm. William R. Burke, director of the Navy Quadrennial Defense Review. He said the 2010 QDR addresses in great length the issue of climate change but doesn’t provide detailed guidance on energy. “I would put more on energy. That’s the mechanism for how we influence the climate change,” he said at an Aviation Week conference. The “tether of fuel,” Burke said, is a “strategic issue we really have to go after.”

Speaking at the same conference, Maj. Gen. Robert E. Schmidle Jr., assistant deputy commandant for Marine Corps programs, agreed that more specific data and energy metrics are needed to help inform the services’ decisions. “We want to get people to do things differently,” he said. “We have people in Afghanistan looking at using poppies as a source of fuel.” But Marines don’t have enough data to determine “whether the business case is going to support it or how much it will cost per gallon.”

Another criticism — mostly from the private sector — is that the official rhetoric is not backed up by additional dollars to fund green technologies.

“The military’s energy security projects will be highly dependent upon the private sector for financing and development because there is no new money budgeted for energy security,” former Defense Department energy executive Paul Bollinger wrote in the DOD Energy Blog (a blog not affiliated with the Defense Department).

Bollinger said that the Pentagon should define “energy security” and what it is worth to the military. It also should “establish long-term contracting authority for domestically produced synthetic or alternative fuels.”

Short cautioned that the private sector should not expect the Pentagon to take the lead in developing new green technology. “The Defense Department is not seeking to be the R&D leaders when it comes to energy,” he said. “Many of our energy problems are no different from the problems that the rest of the country has or the rest of the world.” But because the military is the nation’s biggest energy user, it can provide a huge customer base for alternative fuels and other technologies. “We can be a test bed,” he said.

A case in point is the Marine Corps’ “experimental forward operating base” in Quantico, Va. It was designed to simulate the energy and water demands of company size and smaller forward operating bases in Afghanistan. Contractors were allowed to demonstrate products such as systems to produce potable water on site and increase the efficiency of power generators.

Bollinger stressed that energy efforts will not succeed by “waving environmental flags in front of the military leadership. The focus must be on energy efficiency from a war fighter’s perspective and how it will create a more lethal, expeditionary and sustainable force,” Bollinger wrote. “The environment will benefit from the military reducing consumption and increasing efficiency, but it is not the message to effect the change in a time of war.”

Topics: Energy, Power Sources