United States Navy Buys Biofuel

Producers of biofuels like biodiesel have a major player in their corner now that the U.S. Navy announced on December 11th that it is going to starting buying and using bulk biofuels in mid-2015. The Navy and the Department of Agriculture will put out a solicitation for bullk biofuel in 2014, aiming to start using it across the fleet the following year.

"Farm-To-Fleet"

All of this follows years of experiments by the Navy on planes and ships running on biofuels. The biofuel that the Navy is planning to purchase is classified as an "advanced drop-in fuel" to be blended with the Navy's existing diesel and gasoline, to make a fuel blend suitable for use in ships and airplanes.

How Much Will This Cost?

The military's flirtations with biofuels have its supporters (environmentalists and U.S. domestic farmers wo trumpet the energy independence and jobs created in mid-American farming) but also its detractors. Critics of the Navy's plans invariably point to price. We wrote a blog back in March when the Navy spent $12 million on biofuels for a military exercise in the Pacific Rim, when conventional fuel would have cost less than $2 million for the same job.  

So cost becomes the big factor in this. And this is where assumptions might be sink or swim.

The Navy is proceeding with this planned fuel purchase and integration under the assumption that by 2016, biofuel prices will have dropped to less than $4.00 a gallon.  But what if they haven't? There have been lots of assumptions and optimistic projections that rely on the future being rosier than the present. It appears the Navy is hoping that to be true again, this time.