The US Air Force just completed an initiative to convert all of its bases from military-specific grade jet fuel to a civilian grade – Jet A with additives – that will save millions of dollars in annual fuel costs and allow the Air Force to purchase fuel from a much wider pool of suppliers.
This major logistics simplification frees the Air Force from having to source its jet fuel from a limited number of military-specification-compliant vendors then ship it around the globe. The fuel can now be purchased from commercial sources located anywhere in the theater of operations.
“The main driver for the DLA [Defense Logistics Agency] switch was the military’s need to reduce costs by increasing operational efficiency” an industry analyst told Breaking Energy.
“The key point is that refiners will no longer have to make JP-8, which should boost jet yields even further from current rates of 9%-10% as refiners have more leeway to maximize commercial-grade output. More refiners can bid on military business, so it opens up DLA’s array of suppliers and could lower their prices. Infrastructure for logistics such as tankage will be freed up for other usages” the analyst said.
“The major benefit of switching to a commercial grade of jet fuel is gaining access to a larger pool of suppliers,” Air Force Col. Carmen Goyette, commander of the Air Force Petroleum Agency said in a statement. “The production of military specification fuel only amounted to 7 percent of the 23.3 billion gallons of fuel produced in the U.S annually, which severely limits competition.”
Additional detail regarding additives: “Additives may be included in aviation fuels to improve fuel performance – generally by eliminating undesirable effects – or to meet specific requirements of certain aircraft or airline operators. They are added in quantities that are often only measurable in parts per million,” according to Shell.
JP-8 must be segregated from the supply chain, which increases costs and logistical complexity for the comparatively small volume of fuel.
“Refining JP8 and moving it through the supply chain requires segregated storage, which is a contributing factor to why some suppliers opt out of getting into the military specification fuel market,” said Kevin Ahern, DLA Energy Bulk Petroleum Products director. “Since the conversion to Jet A with additives, we have seen an increase in competition, which should continue to drive down prices.”
The Air Force is the US military’s largest consumer of operational energy by a wide margin and procuring that energy requires the greatest annual DOD expenditure of all the military branches.
Source: DOD Fiscal Year 2012 Operational Energy Annual Report
JP-8 suppliers will reportedly lose premium pricing for the special handling involved, but should be able to offset the loss by selling more civilian-grade fuel. Additionally, increased civilian market demand for Jet A is not expected to drive up prices for that grade because refiners will shift output from JP-8 to Jet A thus increasing overall supply.
The long-term initiative to convert from JP8 to Jet A with additives began with demonstrations at four Air Force bases in November 2009 and was completed Oct. 29 at Wright Patterson Air Force Base, Ohio, ahead of the scheduled 2017 date.
This move on behalf of the military will impact the entire jet fuel market.
“Essentially the whole jet market becomes more efficient without the obligation to make military-grade supplies,” the analyst said.
