Fuel Cost Volatility Tortuous for DOD Planning

Lately I've had a couple of folks say to me that with the cost of oil down to $60 a barrel and Gulf gas pumping at $2.60 in Boston, it looks like the oil-energy troubles are over, and that renewables are screwed. Well, while I'm just as happy as anyone now filling up his tank and getting change back from a $50, my daily exposure to DOD issues tells me that this energy story doesn't end quite so neatly.

Perhaps even more than this summer's high fuel costs which slammed DOD budgets, it's the uncertainty about the future price that's the killer. If you were mapping out the cost of fuel at FOBs for the Army or Marine Units in Afghanistan for the next 3 years, what number would you use as a placeholder price-per-gallon? I'm not even talking about the fully burdened price ... I just mean the price for a gallon of DF2 diesel. Good luck with that.

In Thomas Friedman's latest book Hot, Flat & Crowded, Friedman takes David Edwards' perfect distillation of the situation "Uncertainly Costs Money" and runs with it:

It is now the fossil fuels that have increasingly uncertain prices attached to them (and prices that are trending upward), and it is the renewables that have increasingly certain prices attached to them (and prices that are trending downward).

And you can take that to the bank. Strategic take away: the more DOD can factor in reduced fuel consumption via improved fuel efficiency and fuel management practices, and the faster it can supplement and (sometimes replace) fossil fuels with renewables, the sooner this (budget) hostage situation will be over.