Low Oil Prices Could Save DoD $2 Billion

Low Oil Prices Could Save DoD $2 Billion

If oil prices stay at their current $50-per-barrel range for the rest of the fiscal year, the Pentagon could save as much as $2 billion on fuel, the military’s chief financial officer said on Friday.

The building has already realized some savings from the drop in oil prices, but comptroller Mike McCord told Defense News that he estimates those savings to be about $500 million at the most.

“It’s a lot of money but it’s not burning a hole in my pocket,” he said. “I could have a problem come up that big” pretty easily, “not to mention that this price drop could reverse” quickly, making those savings a much needed reserve fund that could be tapped.

McCord insisted that the Pentagon is in no hurry to pump those savings into other programs to try to alleviate some of the department’s financial stresses, but in the long run “what I’m going to do with the funds will be what is the biggest problem I need to solve today.”

“We are more likely to change the price to the customer when the price goes up because then the ‘shock absorber’ fund will run out of money,” he said. “The shock absorber fund has no theoretical limit on how much money it can hold when prices are going down so you don’t have to lower the price to the customer, but if you can it’s a desirable thing to do.”

One thing he can do is hold on to the money while looking for the biggest problem in the Pentagon that needs fixing.

The comptroller’s office changes the amount it charges the military services for fuel on average twice a year, so changing the price now wouldn’t be much of a surprise.

If the office does that, McCord said, the services would then be able to decide what to do with the savings and reinvest it in their operations “with or without some central control from us.”

Normally, the Pentagon comptroller’s office conducts a mid-year review in April and comes up with a financial action plan for the building for the rest of the year in May or June, which is then offered as an omnibus reprogramming bill in Congress. McCord admitted that “that’s a driving factor” in figuring out what are the highest priorities the building needs to solve.


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Source:: Middle East / Africa

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