Not to worry: DoD still buying $59/gallon “green” jet fuel, despite sequester

posted at 3:21 pm on May 3, 2013 by Erika Johnsen

The Obama administration has rarely passed up an opportunity to continue their relentless subsidization of the biofuels industry — the EPA has lately been particularly defensive about their requirement that fuel producers mix part of their product with certain non-existent cellulosic biofuels, to several lawmakers’ chagrin — and the Obama administration even has the Pentagon ‘doing their part’ to create an artificially inflated market for their politically preferred brand of biofuels (they get to both cater to their cronyish interests, and get some spectacular “green” PR, all at the same time!). The U.S. military has been working on their “great green fleet” plans for awhile now, and despite the fact that their anointed choice of biofuels is at least several times more expensive than their traditional fuels, they apparently don’t have any plans to scrap the initiative. Sequester? What sequester? H/t Joel Gehrke:

“In March, Gevo entered into a contract with the Defense Logistics Agency to supply the U.S. Army with 3,650 gallons of renewable jet fuel to be delivered by the second quarter of 2013,” Gevo announced this week in its first quarter financial report. “This initial order may be increased by 12,500 gallons. All shipments will be at a fixed price of $59 per gallon during the initial testing phase. These shipments are in addition to the renewable jet fuel supplied to the U.S. Air Force (USAF) and the U.S. Navy (USN).”

And what’s the going rate for most of the standard jet fuel, you might ask? That would be less than four dollars a gallon. …So, the Pentagon was ‘forced’ to ground the Blue Angels because of sequestration, but we can somehow afford political stunts like this?

Proponents of the idea of the U.S. military spending more money on ostensibly “green” fuels have a number of arguments they use to justify their case: That the volatility of conventional fuel prices means that the military’s costs are dangerously subject to price swings; that integrating more biofuels will guard against possible supply disruptions; that the military can help spur development of these new technologies that we as a society really-super-cereal need; and that new technologies will somehow help make the military more energy efficient and enhance performance.

Hogwash, all of ‘em, as Kenneth Green aptly explained last summer:

Virtually none of these arguments pass a laugh test. Yes, when conventional fuels rise in price, military operating costs go up. But in a global fuel market, the market value of any liquid fuel will track with the world price of oil on an energy-content basis. Simply switching to biofuels offers no price protection in a world of fuel-fungibility. Analysts at Rand put it quite succinctly in a recent report. “Alternative liquid fuels do not offer DoD a way to appreciably reduce fuel costs.”

As to the risk of a supply interruption, we don’t face one: Rand further observes, while the U.S. military uses a lot of fuel, when looked at in context, it uses a tiny percentage of world, or even North American production. Its consumption is less than one-half of 1 percent of global petroleum demand. The U.S. also produces over 8 million barrels a day. “we can find no credible scenario in which the military would be unable to access the 340,000 bpd of fuel it needs to defend the nation,” says Rand. And, of course, there’s that whole Strategic Petroleum Reserve, which can hold 727 million barrels of oil. Let’s see, 727 million divided by 340,000…the SPR could power the military by itself for almost 6 years.

With regard to the early adopter idea, one would have thought that people would be wary of such arguments. Back in 2007, President Bush made this same argument when his administration implemented a requirement that the country blend in 17 million barrels of ethanol made from cellulose, the technology which did not exist at the time. And it still doesn’t – 5 years later, there is no cellulosic-ethanol production at virtually any price. …

None of these are really sound arguments; they’re just assuring-sounding excuses meant to provide political cover for another indirect biofuel-industry subsidy and the Obama administration’s oh-so-august attempts to be “green” — especially not when SecDef Chuck Hagel has said that the sequestration will lead to “reductions of up to $41 billion, $41 billion that will lead to the suspension of important activities, curtailed training, and could result in furloughs of civilian personnel.” So glad to know the Obama administration has our best national interests at heart, no?


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