Last year, the Pentagon announced plans to make $210 million in matching funds available to help private companies build refineries that are capable of producing at least 10 million gallons of biofuels a year for the military.
Behind the initiative lay the fact that a $1 per barrel increase in oil prices would result in a $30 million dollar hit to the Navy budget. Secretary Ray Mabus also justified the initiative by proposing that the increased use of biofuels would help our strategic position because we would not be compromised by a dependence on foreign oil.
This sounds reasonable on the surface, but it is not. The biofuels that the Navy used in last year’s Pacific fleet exercises cost $27 per gallon versus the petroleum fuel’s $4 per gallon, resulting in a total additional cost of $12 million in biofuels. If the Navy was to purchase 30 million gallons at $27/gallon, it would spend spending $810 million for biofuels as opposed to $120 million for petroleum.
Such a move does not make economic sense. The Pentagon’s spending millions of dollars on biofuels has occurred at a time when many within the Pentagon are worried about the impact on budget cuts on our defense preparedness.
The Navy Secretary’s point about our vulnerability to foreign oil also does not make any sense. The largest export the U.S. had in 2012 was petroleum goods. We are producing an incredible amount of oil through much of the U.S., and we are annually reducing the importation of foreign oil.
We are on the right path to energy independence without the Pentagon’s funding of alternative fuels research. Private firms are already engaged in this study, and the private sector can be counted on to develop biofuels if it makes economic sense. A cash-strapped government should avoid speculation and concentrate on balancing the budget.