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Fuel is still nearly five times as expensive as traditional fuel

For better or worse the U.S. military is trying to fight an "army of one" campaign to switch its massive fuel consumption base to domestic biofuels, safeguarding itself from foreign volatility.  And despite some small bills to the U.S. taxpayers the push appears to be working.

Biofuels work pretty much like any production industry -- you produce more, and price per unit drops.  Back in October 2010 the Navy purchased 20,055 gallons of algae biofuel at a whopping cost of $424/gallon.  At the time that was one of the biggest U.S. purchases of a (non-corn ethanol) biofuel to date.

Fast-forward a year and the Navy is back at it.  It's spent a reported $12M USD to get 450,000 gallons of biofuel.  The bad news?  The fuel cost works out to around $26.67 per gallon -- around 6 to 8 times as much as traditional gas.  The good news?  The cost per gallon has plunged by a jaw-dropping factor of 15.9.

Algae Biofuels
A peek at the algae biofuels production process. [Image Source: Solix Biofuels]

While the incredible cost reduction is unlikely to continue at its current pace, the purchase validates something some national security and environmental advocates have been emphasizing all along -- if you produce more, costs will drop.

The latest fuel purchase is a mixture of repurposed cooking oil ("yellow grease") from Tyson Foods, Inc. (TSN) and algae-based oils from Solazyme, Inc. (SZYM).  Tyson is current partnered with a refining company named Syntroleum Corp. (SYNM) in a joint venture called Dynamic Fuels.  The Navy's contract is with Dynamic Fuels, who has signed a subcontract with Solazyme to buy its algal oils for refining, to help fill the large order.

Navy Secretary Ray Mabus lauded the purchase as helping to grow the domestic biofuels market.  The fuel will be used to help power the Navy's "green" Carrier Strike Group during exercises in the Pacific Ocean next summer.

Carrier Strike Group
The U.S. Navy's "green" Carrier Strike Group [Image Source: USN]

The Navy, which uses 80,000 barrels of oil a day (3.36M gallons/day), has made the amibitious pledge of getting 50 percent if its fuel from fossil fuel alternatives by 2020.  At current demand levels, that would work out to around 613M gallons of biofuel a year.

It's not alone in that objective.  The U.S. Air Force now has 98 percent of its aircraft ready to run on a biofuel blend (though the allowed amount of biofuel in the blend is application-dependent).

The U.S. Armed Forces accounts for about 2 percent of total U.S. fuel consumption.  Of last year's approximately 4.62 billion gallon, $15B USD fuel budget, 75 percent was used in overseas operations, while 25 percent was utilized at home.

Source: Defense News



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RE: A Real Green Strike Force
By bah12 on 12/7/2011 1:20:37 PM , Rating: 2
Aww found a source. http://www.eia.gov/pub/oil_gas/petroleum/data_publ...

So you were correct if you consider Saudi and Russia hostile, and certainly there is some concern there. Personally Venezuela, Nigeria, and Columbia are the ones I'd like to not see on the list. To some extent Brazil as well. Interestingly Iran doesn't even make the list.

Either way I think there is a good opportunity with natural gas, and bio-fuels to quit funding countries that clearly hate us.


RE: A Real Green Strike Force
By ekv on 12/7/2011 2:26:41 PM , Rating: 2
quote:
Either way I think there is a good opportunity ... to quit funding countries that clearly hate us.
Especially if we put ANWR on line. And I'm not arguing against continued development of bio-fuels. Though I would argue that simply slapping a "green" label on a bio-fuel and calling it superior is incurably stupid.


RE: A Real Green Strike Force
By lightfoot on 12/7/2011 3:23:29 PM , Rating: 2
quote:
Personally Venezuela, Nigeria, and Columbia are the ones I'd like to not see on the list. To some extent Brazil as well. Interestingly Iran doesn't even make the list.

It doesn't matter if it is on the list or not. Oil is traded on the global market as a commodity. If due to supply and demand we drive up the price of Canadian or Mexican oil we are also driving up the price of Iranian and Columbian oil. So long as ANYONE is willing to buy oil from these so called "hostile" nations, they will continue to sell it at a profit.

Biofuels can not even begin to move the needle so long as nations like China and India continue increasing their demand for oil.


RE: A Real Green Strike Force
By bah12 on 12/7/2011 3:54:00 PM , Rating: 2
Somewhat true, but losing your #1 customer is never a good thing. I'm not suggesting we drive up the cost of our other sources (as stated that would't help us), rather develop our own sources in house.

If we leverage our own natural gas and oil we can very easily move the needle. I think you underestimate our own supply if you think otherwise. All it takes is a quick look at the State's economies that have oil field reserves, to see that we have plenty of supply. It just wasn't wise to pillage our own supply at $1/gallon. However at $3+ it makes much more sense, combined that with the cheaper labor force due to declining economy and you have a ripe position for us to become much more oil independent (not completely but we can certainly choose our sources easier). Slap an import tariff on all goods form said nations. If anything supply and demand would dictate that it would drive the price of oil down not up.


RE: A Real Green Strike Force
By Reclaimer77 on 12/7/2011 7:21:27 PM , Rating: 2
Our #1 exporter of oil to the U.S, by a huge margin, is Canada. Last time I checked, they don't "hate" us or regard America as a hostile nation.


RE: A Real Green Strike Force
By bah12 on 12/9/2011 9:20:08 AM , Rating: 2
Think you missed my point because yours was the same. My point was that the majority of oil imports come from nations we consider quite friendly. We don't need to be 100% domestic oil, rather only <20% or so. This is not some far fetched reality, we could do it.


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