In 2004, the Pentagon based their fuel price budget on an estimate of $24.44 per barrel of oil. The price of oil was more than $52 a barrel for the last week of July. Each price increase forces the Pentagon to rearrange their bills and try to find programs to cut. One budget cut on the table is to kill the conventional takeoff version of JSF and force the Air Force to buy the Navy's carrier version. While the carrier version currently costs 38 percent more than the conventional one, building one less version of JSF would streamline the production line and drive down costs of the aircraft for both services. Needless to say, the Air Force is unenthusiastic about the ability to operate from Navy carriers.
On the other hand, the rising price of oil is less than one percent of the Pentagon's total expenses. With supplemental spending, the Defense Departments annual budget is over $500 billion, with around $5.6 billion per month spent on operations in Iraq and Afghanistan. Budget planners are also concerned over cost growth in other areas, including major weapons programs and larger numbers of veterans needing health care.
However, there are a couple of upsides to a high price of oil. Cash-strapped states such as China and North Korea are now much less able to afford training exercises at current prices; they had trouble affording them when oil was at $30 a barrel. Secondly, the Air Force may be forced into re-examining new engine proposals for the E-8 Joint-STARS ground surveillance radar aircraft, the B-52 bomber, and the KC-135 tanker. All three aircraft use older jet engines that are gas guzzlers and maintenance headaches, but putting a new jet engine with better fuel economy on an old aircraft isn't as sexy as buying a new fighter. Doug Mohney
Rising oil prices may add up to $4 billion to red ink in the Pentagon budget this year, compounding a deficit already pegged at $6 billion in the next budget year. The Air Force consumes the largest amount of fuel and the soaring price of oil is forcing it to trim spending by $3 billion. All the services are being forced to find ways to save money and the F-35 Joint Strike Fighter program (JSF) is one program under consideration for reorganization.