The US Defense Logistics Agency yesterday announced a slew of major contracts for the purchase of jet fuel. The contracts are valid through April 30th 2015 and the money will come from fiscal 2014 defense working capital funds.
Fifteen different companies – ranging from the world’s largest international oil companies including supermajors ExxonMobil and Shell to firms DOD considers small businesses – won the fuel contracts on the basis of competitive bids. Royal Dutch Shell subsidiary Shell Oil Products won the lion’s share of the awards totaling over $1.6 billion.
The fuel supply agreements were granted on an “indefinite-delivery/indefinite-quantity” basis, meaning DOD agrees to purchase jet fuel from each company for up to the individually settled totals, which collectively add up to over $5 billion.
The fact that the Pentagon plans to spend billions on jet fuel next year is not, in and of itself important, but indicates the strategic value energy plays in US military operations. And this is just aviation fuel, the military also requires billions of dollars’ worth of diesel, gasoline, electricity, etc.
The contracts also highlight the military’s urgent desire to obtain renewable fuel sources like algae-based biofuels, that once cost competitive at scale, can save money – and perhaps more importantly – lessen dependence on the volatile and unpredictable global oil market.
It’s also interesting to note that while ExxonMobil typically shuns investment in renewable energy on the basis of its aversion to technology the company sees as reliant on subsidies and/or tax incentives, one exception in that regard is Exxon’s algae-derived biofuels joint venture with Synthetic Genomics.
