Military hit hard by increasing fuel costs

By Anne Flaherty

Published: June 28, 2008

WASHINGTON — Consumers at the gas pump aren't the only ones suffering sticker shock.

Military units in Iraq and elsewhere will see another hike in fuel costs next week, the second increase this budget year because of soaring oil prices.

On July 1, the cost for refined fuel used by troops will jump from $127.68 a barrel to $170.94 — an astounding 34 percent increase in just six months and more than double what the Pentagon was paying three years ago.

While prices charged to war fighting units have fluctuated in recent years, they have not faced such a steep spike in so few months. The cost of jet fuel, for example, jumped from $2.31 a gallon in October, the start of the 2008 budget year, to $3.04 in December. As of next month, units will start paying $4.07 a gallon.

Pentagon spokesman Lt. Col. Brian Maka said Friday that the latest price hike is needed to cover an anticipated $1.2 billion rise in fuel costs in the next three months.

While a $400,000 a month increase in fuel costs won't affect ongoing military operations, it will require a "reprioritization of daily support activities,” he said in an e-mailed statement.

It also will impact a federal budget already stretched thin by the wars in Iraq and Afghanistan. The U.S. is spending nearly $10 billion a month in Iraq and more than $2 billion a month in Afghanistan.

Iraq owns some of the largest oil reservoirs in the world, although Baghdad has been unable to exploit much of the resource since the 2003 invasion because of high levels of violence and sectarian feuds over how the revenues should be divided.

But because of a steady increase in output of crude oil in recent months and high market demand, U.S. officials estimate that Iraq revenues this year for oil will top some $70 billion — twice what was initially anticipated when Baghdad prepared its 2008 budget.

The situation has lawmakers upset that Iraq isn't covering more of the war's costs.

This week, Congress sent President Bush a war spending bill that would pay for combat operations through the end of the year but require that Iraq match dollar for dollar any money spent by the U.S. to rebuild towns or equip security forces in Iraq.

While Bush is expected to sign the bill, administration officials have countered that Baghdad is already taking control.

Iraqi officials say if oil revenues do generate a surplus, they will revisit their 2008 budget to spend more of the money.

The U.S. military, through the Defense Logistics Agency's Defense Energy Support Center, buys its fuel on the open market, paying from $1.99 a gallon to as much as $5.30 a gallon under contracts with both private and government-owned oil companies.

According to the center, every $1 increase in the market price per barrel translates into a $130 million rise in costs for the military because it relies so heavily on fuel. In Iraq alone, for example, the military consumes some 1.6 million gallons of fuel a day.

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