Military hit with soaring fuel cost

By Anne Flaherty, ASSOCIATED PRESS | Saturday, June 28, 2008

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Consumers at the gas pump aren't the only ones suffering sticker shock. Military units in Iraq and elsewhere will see another rise in fuel costs next week- the second midyear increase because of soaring oil prices.

On July 1, the cost for refined fuel used by troops will jump from $127.68 a barrel to $170.94 - an astounding 34 percent in just six months and more than double what the Pentagon paid three years ago. It's the second increase since prices were set at the beginning of the budget year, on Oct. 1.

While prices charged to war-fighting units have fluctuated in recent years, never have they faced such a steep spike in so few months. The cost of jet fuel, for example, jumped from $2.31 a gallon in October to $3.04 in December. As of next month, units will start paying $4.07 a gallon.

Pentagon spokesman Lt. Col. Brian Maka said Friday that the price increase is needed to cover an anticipated $1.2 billion rise in fuel costs in the next three months. While a $400,000 a month increase in fuel costs won't affect ongoing military operations, it will require a "reprioritization of daily support activities," he said in an e-mailed statement.

It also will impact a federal budget already stretched thin by the wars in Iraq in Afghanistan. The U.S. is spending nearly $10 billion a month in Iraq and more than $2 billion a month in Afghanistan.

Sen. Susan Collins, a member of the Armed Services Committee, said the price increase makes the case that Iraq should start paying some of the military's fuel costs because of its hefty oil reserves.

Mrs. Collins, Maine Republican, and Democratic Sens. Ben Nelson of Nebraska and Evan Bayh of Indiana have proposed legislation that would require President Bush to negotiate with Baghdad on fuel subsidies for troops fighting in Iraq. The measure is included in a 2009 defense policy bill the Senate is expected to debate next month.

"The Iraqis continue to subsidize the fuel for their own citizens, but our troops, which are fighting side by side them, continue to pay top dollar," she said in a phone interview.

Iraq owns some of the largest oil reservoirs in the world, although Baghdad has been unable to exploit much of the resource since the 2003 invasion because of high levels of violence and sectarian feuds over how to divide the revenues.

But because of steady increase in output of crude oil in recent months, U.S. officials estimate that Iraq revenues this year for oil will top some $70 billion - twice what was initially anticipated when Baghdad prepared its 2008 budget.

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