Fully burdened cost of fuel using input-output analysis

Abstract

The Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 mandates that the Fully Burdened Cost of Fuel, including the total cost of procuring and transporting fuel, infrastructure operating costs, and the cost of force protection for the logistics tail, be applied in trade-off analyses for all Defense systems that create a demand for energy. Using data from the Defense Logistics Agency Energy, this thesis builds a model of its worldwide supply chain for bulk fuels, and uses the principles of input-output analysis to calculate the total cost to deliver three fuel types to each destination in the supply chain. Although the Defense Logistics Agency Energy charges a standard price to each service for bulk fuels, these results show that they incur very different costs, ranging from less than a penny per gallon to over 70 cents per gallon, to deliver to different locations. Given the appropriate data on services' fuel distribution networks, a Defense-wide extension of the Bulk Fuels Distribution Model could be used to replace the current seven-step Fully Burdened Cost of Fuel process with a single step, allowing for less complex and more accurate Fully Burdened Cost of Fuel calculations.