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The Honolulu Advertiser
Posted on: Monday, April 7, 2008

Gas is $1.36 for Iraqis, $3.23 for U.S. troops

By Anne Flaherty
Associated Press

Hawaii news photo - The Honolulu Advertiser

U.S. troops in Iraq — and the taxpayers who pay their bills — are paying roughly the same price for gas as Americans back home, in a country where the locals pay less than half as much, thanks to generous Iraq government subsidies. Iraq is banking billions as oil production surges.

KARIM KADIM | Associated Press

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Hawaii news photo - The Honolulu Advertiser

Think you're being gouged by Big Oil? U.S. troops in Iraq are paying almost as much as Americans back home, despite burning fuel at staggering rates in a war to stabilize a country known for its oil reserves.

CHARLES J. HANLEY | Associated Press

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WASHINGTON — Think you're being gouged by Big Oil? U.S. troops in Iraq are paying almost as much as Americans back home, despite burning fuel at staggering rates in a war to stabilize a country known for its oil reserves.

Military units pay an average of $3.23 a gallon for gasoline, diesel and jet fuel, about $88 a day per service member in Iraq, according to an Associated Press review and interviews with defense officials. A penny or two increase in the price of fuel can add millions of dollars to U.S. costs.

Critics in Congress are fuming. The U.S., they say, is getting suckered as the cost of the war exceeds half a trillion dollars — $10.3 billion a month, according to the Congressional Research Service.

Some lawmakers say oil-rich allies in the Middle East should be doing more to subsidize fuel costs because of the stake they have in a secure Iraq. Others point to Iraq's own burgeoning surplus as crude oil prices top $100 a barrel. Baghdad subsidies let Iraqis pay only about $1.36 a gallon.

The U.S. military, through its Defense Energy Support Center, buys fuel on the open market, paying from $1.99 a gallon to as much as $5.30 a gallon under contracts with private and government-owned oil companies.

The center then sets a fixed rate for troops, currently $3.51 a gallon for diesel, $3.15 for gasoline and $3.04 for jet fuel.

Kuwait does grant substantial subsidies, but they cover only about half the fuel used by the U.S. in Iraq. And the discount is eaten up by the Energy Support Center's administrative costs and fluctuations in the market.

Overall, the military consumes about 1.2 million barrels, or more than 50 million gallons of fuel, each month in Iraq at an average $127.68 a barrel. That works out to about $153 million a month.

Historically, these figures are astounding. In World War II, the average fuel consumption per soldier or Marine was about 1.67 gallons a day; in Iraq, it's 27.3 gallons, according to briefing slides prepared by a Pentagon task force established to review consumption.

The surge in demand can be attributed in part to the military's expanding aviation fleet, including helicopters, and its reliance on planes to shuttle cargo and troops between the U.S. and Iraq. Vehicles, too, are more heavily armored and require more energy to run.

Another major contributor is the widespread use of generators to cool troops.

Some lawmakers say the U.S. is paying too much to secure an oil-rich nation that resides in a neighborhood swimming in the natural resource.

Rep. Gene Taylor, D-Miss., a member of the House Armed Services Committee, said he was shocked last December to watch U.S. troops in Kuwait filling diesel tanks at higher prices than he would have paid to fill up his boat in Mississippi.

"The Kuwaitis have been good allies. But let's face it, that nation would not be there if not for the American liberation of Kuwait," he said, referring to the 1991 conflict.

When Taylor pressed Pentagon and embassy officials on the matter, he was told Kuwait was actually offering a rare discount.

Unlike other oil-rich allies, Kuwait is estimated to have saved the U.S. government $1.2 billion in four years, from 2002 to 2006, U.S. Embassy officials told the congressman in a Jan. 3 letter.

Under the current agreement, the Kuwait-owned company supplies 7,000 gallons per day of free fuel to U.S. forces operating inside Kuwait. For troops in Iraq, Kuwait offers 860,000 gallons of jet fuel a day at less than half the market price. This discounted fuel represents more than half the fuel the U.S. uses in Iraq each day.

The rest of the fuel — about 100,000 to 200,000 gallons a day — is sold to the U.S. military at market rate.

Other lawmakers say they want to see the high costs of the war defrayed by Iraq dipping into its own oil revenues, which are projected to be substantial.

Independent auditors estimate that Iraq is headed this year toward a massive surplus because of as much as $60 billion in oil revenues — a consequence of increased production paired with the sharp rise in prices.

"It's totally unacceptable to me that we are spending tens of billions of dollars on rebuilding Iraq while they are putting tens of billions of dollars in banks around the world from oil revenues," said Sen. Carl Levin, D-Mich., chairman of the Armed Services Committee.

"It doesn't compute, as far as I'm concerned."