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DoD May See Extra $1.5B in Fuel Costs

Mar. 11, 2011 - 03:45AM   |  
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The Pentagon will face more than a $1 billion deficit in its fuel accounts if oil prices maintain their current level for the remainder of the year, according to the Defense Department's top budget official.

"I'm worried about it. I think it is potentially a serious problem," said Robert Hale, the Pentagon's comptroller and chief financial officer, during a March 10 taping of the TV show, "This Week in Defense News."

The Pentagon spends roughly $16 billion annually on fuel. About $11 billion is allocated from the base budget, while the remaining $5 billion is spent in the Overseas Contingency Operations accounts, which primarily fund military operations in Afghanistan.

If petroleum prices stay at the current level for the rest of the year, the DoD will have an additional $1 billion to $1.5 billion bill, Hale said.

Crude oil prices are topping $100 per barrel. A $1 rise in the price of a barrel of petroleum sustained over a year increases DoD's fuel costs by $130 million, according to a Pentagon spokeswoman.

"If they spiked higher, then we would be substantially higher than that," Hale said. "It is a concern."

The Pentagon faces a conundrum because Congress has not passed a 2011 defense spending bill. Instead, lawmakers have passed a continuing resolution, which limits defense spending at 2010 levels, meaning DoD must ask permission before shifting spending within its own accounts.

Hale remained pessimistic that DoD would receive additional funding should it face a shortfall in its fuel coffers later this year.

"I doubt at this point and in this environment that we would get added funding," he said. "If the increase in cost is enough, we could consider asking for a supplemental. I don't anticipate that."

The more likely solution would be to reprogram funding within operations and procurement accounts, according to Hale.

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