Truman National Security Project

The Navy’s advanced biofuels programs have become a frequent target of criticism for certain beltway policy commentators.  Despite the potential for these fuels to reduce our military’s petroleum dependence, critics argue that the current early cost of these programs justifies terminating present and future investments. But these critics ignore the context and promise of, and often misrepresent the facts about, the military’s investments.  The cost in dollars of the fuels we use today is only part of the equation.  In responsibly planning for America’s security the Department of Defense must also account for the costs of uncertainty, and our access to oil is anything but certain.  Our military leaders believe that we must develop a solution before we face a crisis unprepared, and that advanced American biofuels can be a part of that solution.

Today, oil is a strategic commodity – its supply dictates the march of armies and the fate of nations. But two centuries ago, the world’s top strategic commodity wasn’t oil. It was salt. Salt was the world’s preeminent way of preserving foods, especially for long voyages. Without salt, Christopher Columbus would not have made it to America. Wars were fought over salt; kingdoms were built on it. And then, salt—the world’s key strategic commodity—was out-innovated by an alternative technology: the icebox.

As R. James Woolsey, former Director of Central Intelligence, wrote, “Today, no nation sways history because it has salt mines. Salt is still a useful commodity for a range of purposes…But to most of us there is no ‘salt dependence’ problem at all — because electricity and refrigeration decisively ended salt’s monopoly of meat preservation, and thus its strategic importance. We can and must do the same thing to oil.”

Given this historical context, there are three critical elements to understanding the Navy’s current efforts.  First, Navy is investing in a broad range of next-generation, drop-in fuels.  They are derived from feedstocks like algae, recycled cooking oil, or camelina – an oil-seed plant in the mustard family – that can be grown without affecting food supplies, and are refined so that they can be used in military ships and aircraft without retrofitting equipment.

Second, Navy officials have repeatedly stated that the Department will not purchase fuels in greater quantities than required for research and testing until they are cost competitive with petroleum.  Thus far the Navy has pledged to invest $170 million, along with equal shares from the Department of Energy and Department of Agriculture, for advanced biofuels development- or 0.03 percent of the DoD budget.  Finally, these fuels are becoming continually closer to cost competitiveness with petroleum.  Between the beginning and end of 2009 the price of advanced biofuels dropped 84 percent.  Since then, the price has fallen an additional 65 percent.  Advanced biofuels are still more expensive than petroleum-based fuels, but the Navy calculates that they will be cost competitive by 2020 if not sooner.

What nobody can calculate with reasonable certainty is how much a barrel of oil will cost a year from now, let alone a decade.  But we do know that the volatility of the international oil market has already degraded military readiness.  DoD is the largest consumer of fuel in the world, spending more than $17 billion in 2011 on petroleum fuels.  With such massive fuel requirements, rises in the price of oil are incredibly costly.  For every $10 the price of a barrel of oil rises, DoD is left with a $1.3 billion budget shortfall.  Because these shortfalls are impossible to predict, operations and maintenance budgets are drained to plug the holes.  In conversations with retired military leaders, I’ve heard story after story of fighter pilots having their flight hours cut to minimum readiness standards and ships left in port for training exercises, all because the respective unit’s fuel budgets were disrupted by price increases.

Another certainty is that oil will only be more expensive and difficult to secure in the future.  Global demand for oil is rising at a breathtaking pace with no sign of slowing down.  While American demand has been very high but relatively static for some time, demand in China, India, and the rest of the developing world is skyrocketing.  According to the Energy Information Administration, America’s oil consumption is expected to grow by 11 percent over the next two decades.  During that same timespan, China’s oil consumption is expected to grow by 80 percent, and India’s by 96 percent.  It is unrealistic to imagine that increasing domestic production of oil, a globally priced commodity, could keep up with such dramatically rising demand.  And the situation would be far worse if Iran were to follow through with its threats to close the Strait of Hormuz, cutting off the Persian Gulf’s supply of oil from the world market.  With so much at stake, our military’s freedom of action requires the development of alternatives to power our ships, tanks, and aircraft.

The cost of our fuel is a critical consideration, and for that reason our military will only turn to advanced biofuels for its energy requirements when it makes sound budgetary sense.  The costs of uncertainty must also be acknowledged in military planning.  We cannot know the threats we will face in years to come, but there is no question that if we fail to act the burdens our military will face will be far more severe.

Mike Wu is the Advocacy Policy Director at the Truman Project.