reports that surging oil prices are hitting the military hard:
The military spent $11.6 billion on petroleum in 2007, up from $7.8 billion in 2005, although the services purchased roughly the same amount of fuel -- 132 million barrels -- both years. The standard price in 2005 was $1.34 a gallon. The Air Force is DESC's largest customer. Its planes burn 7.1 million gallons of fuel a day. Half of every dollar DESC earns comes from the Air Force, versus 28 cents from the Navy and just 12 cents from the Army. A DESC fact book noted that the Air Force bought $6.1 billion worth of fuel in 2006. Figures supplied by the Air Force indicate that every $10 rise in the price of a barrel of oil increases the service's operating costs by $610 million a year. According to a report produced last year by LMI Government Consulting, the military uses nearly 60,000 barrels of oil a day to support combat operations in Iraq and Afghanistan. Overall, though, combat operations have only slightly increased the amount of oil the military buys. Prior to the wars in Iraq and Afghanistan, the military bought 110 million barrels of oil annually from DESC.
Anyone who follows this stuff won't be surprised at all by these numbers. In fact, at $4 billion, the increase strikes me as surprisingly small. But, as they say, a billion here, a billion there... I do think these numbers are likely to fall a bit going forward, if only gradually. After reading this, I'm not so sure that the price of oil is going to continue to rise. At least the market doesn't seem to think that this will go on forever. Also, the military is gradually shifting towards "greener" technologies like hybrid engines for its vehicles, and synthetic fuels for its aircraft. This has nothing to do with environmental stewardship--though the Pentagon often tries to spin it that way--but rather the cost of gasoline, and the risks of getting it to the people who need it. (The Army is likely to get on with such a transition long before the Air Force.) Driving gas trucks around Iraq is dangerous and expensive, but more hybrids will reduce the demand for such services. In Afghanistan, the cost of gas is even more extreme, and when helicopters are required to fly the stuff to remote locations, the price can spike to several hundred dollars a gallon. Hybrids will also provide more electric output for the sophisticated electronics that are now packed into every Humvee. As it is now, military vehicles are starved for electricity. On the whole though, I feel like I'm paying twice as much at the pump as I was in 2005, so if the military is only paying 60 percent more, maybe that's not so bad. But for the crowd that's been chanting no war for oil over the past few years, it seems clear that the military is not pursuing a 'kick their ass and take their gas' strategy. Though they are getting the first part down pretty good.
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