Re-examining Best Practices for DoD Fuel Acquisition
DEFENSE BUSINESS BOARD WASHINGTON DC
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In 2010, the Department of Defense DoD spent more than 13 billion on petroleum fuel products. This represents approximately two percent of the Department s budget. The Department relies upon a market reserve fund, or working capital fund, to buy fuel based on spot market prices. As a result, the Department does not exercise price protection techniques for its future fuel purchases. The price of fuel has fluctuated from 35 per barrel in 2004 to 140 per barrel in 2007. Given these broad market fluctuations, DoD may be missing cost saving opportunities by not utilizing management tools to protect future prices and reduce risk. In an effort to identify private sector best business practices to purchase large fuel volumes, the Chairman of the Defense Business Board hereafter referred to as the Board created the Task Group on Reexamining Best Practices for DoD Fuel Acquisition. This is a follow-up to a 2004 Board study that reviewed fuel hedging and examined potential opportunities to help reduce the Department s exposure to fuel price volatility.
- Economics and Cost Analysis