By Geoff Fein
While the nation last week saw fuel prices hit the $143 per barrel mark, the Navy saw its price for oil rise to $170 per barrel, an 89 percent increase in the past nine months, a Navy official said.
At the beginning of FY ’08, the Navy was paying $90 per barrel, Capt. Chip Cotton, branch head for fleet training and readiness reporting, told Defense Daily in a recent interview.
The Defense Energy Support Center (DESC) adjusted the price to $127 before the July 1 spike to $170 a barrel.
“All our conservation efforts have really been outstripped by the pace of inflation…fuel costs,” Cotton said. “We went from $90 a barrel to $170 a barrel in nine months. I can’t do conservation efforts, I can’t bring a new fuel online, I can’t bring a new system on line to keep pace with that.”
The jump in fuel costs that occurred from June 30 to July 1 is going to cost the Navy about $300 million, Cotton added.
“Those conservation efforts, i-ENCON and others, we have cost avoidance in those areas of about $300 million a year. So all the conservation efforts just got whacked,” he said.
i-ENCON is the shipboard incentivize energy conservation program run out of Naval Sea Systems Command.
“We are doing the best we can, but this pace of inflation…it is going to be a real challenge,” Cotton added.
But if the country is paying in the $140 range for a barrel of oil, why are the Navy’s numbers that much higher? Cotton said there are times the Navy has been able to buy oil below the going market rate.
“So now [DESC) have raised it above the market price so they can recoup that shortfall,” he said.
The jump in fuel cost, especially during a time of war, had gathered a lot of attention, Cotton noted. “A lot of different folks are looking at it.”
“The price increase we saw on July 1 for FY ’09 will mean about $1.2 billion that we currently don’t have for fuel costs,” he said.
In the fleet readiness accounts, the Navy spent roughly $2.6 billion in FY ’07 for fuel. In FY ’08 the price jumped to $3.08 billion, Cotton said. “[We are] looking at topping $5 billion a year next year…in FY ’09.”
“In the very short-term, we literally accept the price of fuel that is out there. We do the best we can to do our conservation efforts,” he said. “We are looking at what we can do for training, we are trying to make sure we are exploring…on the shore establishment side we have some very large wind projects, photovoltaic projects…”
There are some longer-term initiatives that the Navy is looking at, Cotton noted. These are again things the Pentagon is doing and each of the services is exploring both more domestic sources and more renewable sources for fuel. The goal, Cotton added, is to reduce the Navy’s reliance on non domestic sources and non-renewable forms of energy. “There is some [research and development] efforts that we are looking at.”
But a big problem for the Navy is that its fuel usage counts for only .6 percent of the entire U.S. consumption for transportation, Cotton said. That means the Navy isn’t a big driver in the market place when it comes to developing new technologies, he added.
The first steps the Navy is taking as it examines domestic and renewable resources is to make sure they have in place all the test protocols and certifications that the service needs to be able to certify those fuels for use in ship, aviation and vehicle engines, Cotton said.
“But what we can’t do in all of this, is that we can’t swing the pendulum so far that we run the risk of impacting any of our capabilities. That’s the threshold, that’s the bottom line. We won’t sacrifice our capability,” Cotton said. “Putting our sons and daughters in harm’s way at the expense of savings a couple of dollars of gas…we want to make sure that is very clear up front.”