The global increase in fuel prices is estimated to cost the Pentagon over $3 billion more in fiscal 2022 than it had originally expected, the department’s comptroller told lawmakers on Wednesday. 

While the final FY ‘22 budget Congress passed in March factored in $1.5 billion to cover increased fuel costs, DoD Comptroller Mike McCord said the Pentagon believes the current rate of inflation will likely leave another $1.8 billion in fuel cost increases through the end of the fiscal year.

Pentagon Comptroller Mike McCord. (DoD photo by Lisa Ferdinando)

“Since [the FY ‘22 budget was passed], largely due to the price spike after the Russian invasion of Ukraine, we estimate a bill of $1.8 billion for the rest of this fiscal year. So over $3 billion across the course of this fiscal year in increased fuel prices if the situation remains as we see it today,” McCord told the House Budget Committee.

McCord was testifying before the House Budget Committee on the Pentagon’s $773 billion budget request for FY ‘23, which senior defense officials have previously said assumed an inflation rate of about 2.2 percent (Defense Daily, March 28). 

Rep. Jason Smith (R-Mo.), ranking member on the House Budget Committee, said “$3 billion seems like a real concern” and asked McCord how inflation is affecting the department’s projection on fuel prices.

“What we discussed last year is still the case today, that fuel is our most volatile and easily recognizable price increase when prices change,” McCord responded. 

Smith also asked McCord if the department’s long-term contracting mechanisms largely insulate the Pentagon from the impacts of fuel spikes, which McCord refuted adding it has to account for such adjustments even in larger contracts. 

“Although we are a very large consumer of fuel, we are still at the one percent level in terms of the fuel markets. We cannot move the markets ourselves. We don’t have an ability to buy with long-term contracts that completely insulate us. We do buy by contract but they only go so far out,” McCord said.