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Budgeting for Biofuels:The Military’s Dependence on Petroleum Must be Mitigated

Budgeting for Biofuels:The Military’s Dependence on Petroleum Must be Mitigated

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Petroleum is currently used to satisfy 80% of the US military’s energy needs and is relied upon as the single source of liquid fuel for transportation, operations, and training. The volatile price of oil has incurred huge unbudgeted costs for the military, causing national security risks for the military’s operations.

In light of national security risks it has become widely agreed upon that the Department of Defense should be hedging its bets against petroleum use.  The Navy is seeking to move away from petroleum dependence by investing in biofuels, the primary alternative to petroleum fuels.

However, both the House and Senate Armed Services Committees have moved to block the Navy’s plans to purchase biofuels for testing and to directly invest in domestic biofuels producers. This action undermines the military’s efforts to mitigate the long term strategic risks posed by its dependence on petroleum. Biofuel research and development needs to be on the table as the military reduces its dependence on petroleum.

Why does the military need to shift away from petroleum fuel?

Currently the military is dependent upon volatile petroleum prices set on the global market. These prices are largely determined by the unpredictable politics of foreign countries. Even if the military dose not import oil directly from Iran or the Middle East, the price paid for petroleum is largely set by market conditions in the region.

Price instability has caused budgeting dilemmas for the military in recent years. A June 2012 Congressional Research Service report found that the cost of buying fuel has increased faster than any other major DoD budget category. Despite the DoD’s cutting back 4% on petroleum use from FY2005 to FY2011, its spending on petroleum ballooned 381% in real (i.e., inflation-adjusted) terms during this time period.

Along with rising prices, the short term volatility of oil prices poses substantial risks for DoD budgeting and operations. Secretary of the Navy Ray Mabus has stated that every dollar increase in the price of a barrel of petroleum costs the Navy about $31 million of unbudgeted funding annually. DoD reports have found that a 10% increase from the FY2011 price of fuel would cost the DoD as a whole an additional $1.7 billion a year.

Former Defense Secretary Robert Gates asserted that unbudgeted fuel costs could force operational cuts in Air Force flying hours, Navy steaming days, and training for home-stationed Army troops. These cuts pose serious security risks for military operations. While testifying on military budgeting for 2013 Secretary Mabus stated that “we would be irresponsible if we did not reduce our dependence on foreign oil.”

Steps Forward

Steep increases and fluctuations in petroleum spending emphasize the need for the DoD to hedge its bets against rising petroleum prices. The Navy and Air Force have set forth 2020 goals to reduce their oil usage by 50%, by using alternative fuels. Secretary Mabus and others have stated that efforts toward biofuel development will increase the security of the energy supplies and reduce the service’s vulnerability to price shocks.

In the short-term, biofuels will do nothing to help the budget – this year’s investments in biofuels will do nothing to rectify the budget – but over the longer term, developing an alternative to oil will be an important way to break oil’s monopoly.

The military must be willing to take significant steps today to reach its goals of mitigating the security risks of its current dependence on oil. As will be expanded upon in further posts, biofuels should be on the table as part of the military’s comprehensive plan for hedging its bets against petroleum use.

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