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Feasibility of JP-8 to jet a fuel conversion at U.S. military facilities.

INTRODUCTION

The Secretary of the Air Force remarked recently that the United States Air Force (USAF) spent approximately $6.6 billion on aviation fuel in fiscal year 2006. This is $1.6 billion more than budgeted for that year alone (Wynne, 2007). In 2005 the Defense Energy Support Center (DESC) purchased $4.96 billion worth of Jet Propellant -8 (JP-8) and Jet Propellant Thermally Stable (JPTS), over $1.4 billion more than the previous year (DESC Fact Book, 2006). The need to address these rapidly increasing fuel costs demands the collective attention of Department of Defense (DoD) leaders and government lawmakers.

One option is for the military to abandon its consumption of unique, custom-blended fuels and instead use the same commercially available fuels that the airlines use. In this spirit, our research investigates the technical feasibility and cost of using Jet A to replace JP-8 at multiple Northwestern United States military installations. In this paper, we map the relevant bulk JP-8 supply chain to determine the commodity price for the Pacific Northwest and identify options for storing and issuing Jet A in lieu of JP-8. We also determine if the applicable military aircraft or equipment can use Jet A as a primary or alternate fuel. We conclude with a cost assessment of feasible options.

Our research is important and directly useful in fuels pricing and analysis for two main reasons. First, we established a new and more accurate "apples to apples" pricing comparison, which was adopted as the new standard by the two agencies necessary to enact a switch from JP-8 to Jet A fuel. We also showed that a switch to Jet A fuel in the Pacific Northwest would not show a savings as suggested by a 2007 C4e study, but instead would cos more.

BACKGROUND

Although commercial aircraft routinely receive JP-8 fuel at military bases and military aircraft occasionally receive Jet A fuel when landing at commercial locations, little documentation explores the overall impact of a complete shift in the DoD's first tier fuel requirement from JP-8 to Jet A. Most fuel related studies focus on fuel economy improvements and cost avoidance efforts in the logistics field, rather than a complete switch to a conventional commercial product. This study helps determine if a switch from JP-8 to Jet A is feasible and if any costs can be avoided through such actions. The aspect of feasibility refers to the substitutability of Jet A for JP-8 and is critically important, as any cost analysis would be meaningless if Jet A could not be used. Although more research is needed in this area, we found that most USAF aircraft are already certified to use Jet A fuel and there are no substantial barriers for its widespread use.

The sheer fuel volume our military consumes and the logistical implications of ensuring the availability of fuel for any and all military mission requirements drives DoD policy development concerning JP-8. In order to reduce logistics related hazards, the military services agree to use a single fuel, JP-8, for both air and land-based missions. Following a 2004 revision to the single battlefield fuel concept, the demand for JP-8 grew exponentially when it became the DoD fuel of choice (DoD Directive 4140.25, 2004). Increased military demand, coupled with the growing price of crude oil, further emphasizes the DoD's continued JP-8 reliance and possible vulnerabilities.

To switch from JP-8 to Jet A, at least two DoD petroleum agencies must be in agreement before the Air Force and other military branches can adopt commercial jet fuel usage for military applications. The Air Force Petroleum Office (AFPET) is responsible for determining the feasibility of using particular jet fuels while DESC is accountable for jet fuel purchasing agreements between the government and commercial fuel refineries. Therefore, without AFPET's technical certification and favorable DESC cost analysis, new jet fuels cannot be considered as options for the United States armed forces.

To examine the merits of a JP-8 to Jet A conversion, AFPET contracted C4e Inc. to perform two separate studies in 2003 and 2007. The first study (C4e, 2003) dealt mainly with the jet fuel supply chain and technical aspects of such a conversion, and noted the chemical differences, aircraft technical requirements, and cost benefits associated with a full DoD worldwide transition to commercial Jet A or Jet A-1. The main differences highlighted between the two fuels included their freeze point differential and potential savings between $39 and $137 million dollars annually with the full DoD adoption of commercial jet fuel usage. Specifically, "The JP-8/Jet A price differential, based upon average cost at the origin without additives, ranged from .0104 to .0459 dollars per gallon, depending upon the acquisition area. For Jet A-1, the potential savings range was from .0095 to .0287 dollars per gallon." (C4e, 2003). Likewise, C4e's 2007 study produced similar results, but narrowed the Jet A adoption focus to military locations within the continental United States.

The 2007 study further focused on the U.S. East Coast and examined military bases that received JP-8 from Defense Fuel Supply Point Charleston. Noting the freeze point differential between the two fuels, C4e established that the vast majority of aircraft and equipment at these locations were approved to use Jet A as a primary or alternate fuel. Therefore, the defining factor of a JP-8 to Jet A conversion in this geographic area rested with a cost analysis. C4e found, "a calculated cost differential of $0.004951 per gallon between JP-8 and Jet A during the period from July 2005 through July 2007." (C4e, 2007). Their estimated overall savings from a JP-8 to Jet A conversion at Charleston equated to $520,922 in this two year period. C4e also stated that they "believe the potential savings at Charleston is probably lower than the savings would be for inland and West Coast locations." (C4e, 2007)

For our research, AFPET established a new geographical area of study in the Pacific Northwestern United States. McChord Air Force Base proved to be most similar to the operations at Charleston AFB. Upon recommendation from the Puget Sound supply point and approval from AFPET, we selected McChord and five additional JP-8 using military installations due to their influence by West Coast jet fuel prices. Our methodology for comparing Jet A and JP-8 prices is based on the C4e research, but revised to more accurately account for associated additive, transportation, and overall monthly refinery costs. Rather than using weighted averages for the development of DESC JP-8 prices, we gleaned location-specific pricing baselines from contract data. Furthermore, we subtracted the actual costs for additives and transportation from military jet fuel prices to ensure a bare refinery price for JP-8 was compared with a bare refinery price for Jet A. As a result, we accomplished an "apples to apples" comparison of actual commercial and military grade jet fuel prices rather than using averages to account for base specific fuel prices, additive costs, and transportation charges.

FUEL COSTS AND FEASIBILITY

We conducted our research in three phases: 1) Supply Chain Mapping, 2) Technical Feasibility Analysis, and 3) Price Analysis.

Research Context And Assumptions

We selected the locations for our research upon expert recommendations from the Puget Sound fuels supply point and AFPET. The facilities considered are: McChord, Fairchild, and Mt. Home Air Force Bases, Kingsley Field Air National Guard Base, Whidbey Island Naval Air Station, Fort Lewis, Yakima Firing Range, and Port Angeles Coast Guard Station. Criteria necessary to meet the stipulations of our study included the sole influence of West Coast pricing mechanisms and receipt of JP-8 between October 2006 and September 2007. We dropped Mt. Home from our study because its JP-8 prices were influenced by West Coast, Rocky Mountain, and U.S. Gulf Coast pricing criteria (DESC Market Research, 2007). We removed Port Angeles from consideration because they received no JP-8 shipments during our assessment time period (AFPET Plans and Programs, 2007). We performed all analysis using electronic spreadsheets, to facilitate data transfer and communication of results to the research sponsor.

Phase I: Supply Chain Mapping

To validate supply chain distribution data, it is important to compare the delivery methods required in the purchase requests with the final delivery methods listed in the associated contract documents. We obtained specific contract information for October 2006 through September 2007 at each location. In addition to transportation modes, information on product line item number, quantity awarded, base unit and market price of the product, and the cost per gallon for additives and transportation (if included in the award price) was also obtained.

Each contract lists the first required transportation mode and contract solicitations list the last transportation mode required in the distribution supply chain. Information from AFPET can then be used to fill in the intermediate transportation modes that are not found in the contract data. For example, Fairchild JP-8 must first move via ocean tanker from the refinery to supply point Vancouver, then it is moved by barge from Vancouver to supply point Pasco, and finally from Pasco via pipeline to Fairchild.

Phase II: Technical Feasibility Analysis

To determine if Jet A can be used in lieu of JP-8, we used DoD policy (DoD, 2006) and the 2007 C4e Study as reference documents for the aircraft and equipment encountered in our research. To analyze JP-8 specific data from the most recent fiscal year, we obtained data from AFPET for October 2006 through September 2007. We found several different names and model types existed for essentially identical vehicle types. Therefore, we pooled similar names and model variants into single categories. We then sorted the data by gallons issued in decreasing order. For example, Table 1 shows that C-17 aircraft receive the majority of JP-8 issues at McChord.

Table 2 summarizes our computations for McCord refueling actions between October 2006 and September 2007, and it shows that more than 95 percent of the aircraft refueled could use Jet A as a primary or alternate fuel. It also shows a total consumption of over 45,800,000 gallons. We performed similar computations for all six locations.

Note that Table 2 shows four types of consumption data. The first subtotal includes helicopters, ground equipment, and aircraft in which Jet A is approved as a primary or alternate fuel. Helicopters and ground equipment are included in this subtotal since freeze point is not an issue for ground usage or aircraft flown at low altitudes. The fuel issued in Table 2's second subtotal reflects aerial refueling requirements, but Jet A compatibility for any aircraft receiving fuel in-flight could not be determined under our research scope. We thus assumed that additized Jet A usage is acceptable for all in-flight receivers in our research. This assumption should be examined in future studies.

Phase III: Price Analysis Methodology

Our price analysis goal was to compare monthly prices that DESC pays for JP-8 in West Coast areas against equivalent prices that DESC would pay for Jet A. To analyze comparable prices between Jet A and JP-8, several factors must be considered in order to develop an "apples to apples" comparison. Much like our methodology for mapping the JP-8 supply chain, we used a combination of contract solicitation data and information from the final contract award documents for our price analysis. We also used Platts pricing data to establish West Coast specific pricing mechanisms for determining monthly prices that DESC pays for JP-8 and Jet A.

We compared the data contained in the contract solicitation to the terms that were agreed upon in each contract. By using this data and information provided through the DESC Bulk Fuels Contracting Office, we could determine specific pricing information for each Air Force location. In order to highlight the pertinent contract information for Fort Lewis, we first had to establish which line items and schedule notes applied, because the award quantities may pertain to a single or several different military installations (DESC Bulk Fuels Contracting, 2007). The costs per gallon for transportation are denoted in the contract schedule notes and identify the specific line items for which they apply. The last data of interest is the final base unit price and information that specify if additive costs are included. According to the DESC Bulk Fuel Contracting Office, Static Dissipater Additive (SDA) and Fuel System Icing Inhibitor (FSII) are normally the only additives included for pricing. Although the additive Corrosion Inhibitor/Lubricity Improver (CI/LI) is a requirement for Fort Lewis-based usage, its cost per gallon is so miniscule that it is absorbed but rarely noted in the base unit price (DESC Bulk Fuels Contracting, 2008). Therefore, JP-8 for Fort Lewis is awarded with the cost of all additives included in the final base unit price. The price for FSII and SDA is calculated as follows:

FSII = Cost for FSII + Cost for CI/LI (1)

SDA = Cost for SDA only (2)

The base market price is the starting price for all JP-8 bids under this contract and can be more or less than the base unit price at the culmination of the award process. Although these prices were noted as effective on 14 February 2006, they merely established a baseline to use against monthly prices as they increase or decrease throughout the next fiscal year. The prices that DESC paid under this contract were not exercised until 1 October 2006.

We found that for our period of interest, the overall base unit price was $1.857217, and the specific base market price for Ft. Lewis was $1.847317. Our next step established a specific differential between the base unit price and base market price in order to account for any applicable additive and transportation costs.

When the base unit price is subtracted from the base market price, an initial differential is derived that accounts for additives, transportation, and other costs that may be included within the contract. In order to arrive at a final differential, applicable additive and transportation costs must be removed. Table 3 is an excerpt of the September 2007 data from the price comparison spreadsheet for a specific contract number. It shows that the final differential for Ft. Lewis is the difference between the base unit price and base market price, void of all applicable additive and transportation costs. This new step sets the research apart from previous efforts and is extremely important because the comparison price for Jet A lacks all transportation and additive costs. The differential calculations were derived using

Initial Differential = base unit price base market price (3)

Final Differential = Initial Differential Additive Costs Transportation Costs (4)

After establishing a final pricing differential between the base market price and base unit price, we determined DESC's monthly JP-8 prices by using Platts pricing data for the Los Angeles pipeline (LA Pipe), San Francisco pipeline (SF Pipe), and Seattle barges (DESC Market Research, 2007(2)). DESC relies on Platts data extensively in order to develop pricing baselines for DoD energy requirements (DESC Market Research, 2007).

Since the price DESC pays for JP-8 is set every Tuesday morning, a monthly specific base market price equivalent is derived by taking the previous five business days' midpoint average for SF Pipe, LA Pipe, and Seattle barge (DESC Market Research, 2007). In order to remain consistent with the 2007 C4e study, we used the final Tuesday of each month as the sampling point. Table 4 is an excerpt of Platts data provided by DESC Market Research and illustrates how the base market price can be derived. We computed the base market price for the following Tuesday, 14 February 2006, by averaging the midpoint prices for LA Pipe, SF Pipe, and Seattle Barge from 6 February to 10 February 2006.

Platts 5-Day Monthly Midpoint Price Avg = (SF Pipe + LA Pipe + Seattle Barge) ~ 3 (5)

We thus derived the Platts 5-day price averages for the last Tuesday of each month. This calculation is founded on equations developed from the 2007 C4e study. However, we modified and updated this specific price analysis, which was approved by DESC Market Research and implemented in our study. Once the final pricing differential is applied to each month's 5-day pricing average, a monthly price that DESC pays for JP-8 is calculated with the following equation:

DESC JP-8 Price = Platts 5-Day Monthly Midpoint Average + Final Differential (6)

The second portion of our price analysis calculates an equivalent price DESC would pay for Jet A if it were approved for routine usage. We consider three overall factors in order to generate a monthly Jet A price: Platts Low Five-Day Price Average, 30-day payment term surcharges, and an airline pricing factor (C4e, 2007). In order to arrive at a monthly price that airlines routinely pay for Jet A, we use a calculation similar to the five-day midpoint average. Table 5 depicts an excerpt, showing the Platts 5-Day Low Price Average.

Platts 5-Day Lowpoint Average = (SF Pipe + LA Pipe + Seattle Barge) ~ 3 (7)

C4e found that "Commercial airlines have reported to DESC representatives that they are able to procure commercial Jet A at the Platts jet low price plus $.002 to $.0025." (C4e, 2007). C4e applied a $.00225 average APF to the Platts low prices in the Charleston Jet A Study and we applied the same cost to the pricing data for our research. The airline pricing factor remains constant for all pricing calculations in this study.

The last factor to consider is a surcharge that accounts for the 30-day pricing terms of the DoD, as opposed to immediate payment terms generally implemented by commercial airlines. This "cost of money" is circled in Table 6. The cost of money is calculated by multiplying the "annualized cost of capital to refiners, at the prime lending rate, by the fraction of a year between delivery and payment; 30/365 or .082192." (C4e, 2007). Since our research timeframe is the same as the 2007 C4e Study, we used the same prime lending rate of .0825. We then multiplied the resultant term by the Platts 5-Day Low Pricing average to arrive at a 30 day payment term surcharge that DESC pays for Jet A. For example,

Cost of Money = Platts 5-Day Lowpoint Average_Prime Lending Rate _(Payment Term ~ Days in the Year) (8)

The equivalent price DESC pays for Jet A is computed by adding the airline pricing factor and Cost of Money to Platts 5-Day Low Price Average. This process was repeated on a monthly basis, from October 2006 through September 2007, for the six study locations.

DESC Jet A Price = Platts 5-Day Lowpoint Average + airline pricing factor + Cost of Money (9)

Rather than conducting a day by day comparison of DESC Jet A and JP-8 prices, we calculated the price of each fuel for the last Tuesday of every month. Since the weekly price of JP-8 is set every Tuesday morning by DESC, this pricing timeframe allows for a standard monthly analysis and was also used by C4e (C4e, 2007).

Once we determined the monthly calculation for each fuel, we subtracted the price that DESC pays for Jet A from the price they pay for JP-8. If the result is negative, the price of JP-8 is cheaper than Jet A. Recall that the price of JP-8 is determined by contract. We compared fiscal year average JP-8 prices that apply to individual locations to fiscal year averages for an overall DESC Jet A Price. As a result, we calculated the incursion or avoidance of costs as they relate to each location, rather than a weighted average for each contract.

Table 7 shows that McChord issued 45,841,076 gallons of JP-8 from October 2006 through September 2007. When this total is multiplied by the base specific, yearly, average price differential between Jet A and JP-8, we can establish a dollar figure that quantifies costs incurred or avoided through a complete fuel conversion. For example,

Base Specific Price Difference between Jet A/JP-8 = Yearly Avg, Base Specific JP-8 Cost DESC Jet A (10)

Equivalent Price

Costs Incurred/Avoided = Gallons of JP-8 Issued per Base_Base Specific Price Difference between Jet A/JP-8 (11)

A JP-8 to Jet A conversion would incur additional costs of $1,106,221.68 for McChord, Fort Lewis, and Yakima Firing Range. When the three other locations are added we show a total additional cost of $1,381,052.50

RESULTS--ARE THERE SUPPLY CHAIN SAVINGS BY SWITCHING FROM JP-8 TO JET A?

The transportation supply chain map shows that the transportation modes employed are exremely variable due to the nature of governmental contracts. Since JP-8 supply is generally contracted on a yearly basis, barring production stoppages or contract defaults, the delivery methods employed in the jet fuel supply chain routinely change from year to year (DESC Bulk Fuels Contracting, 2008). Therefore, any cost avoidance or incursion related to transportation mode will remain variable unless a long-term mode of shipment is adopted and mandated when contracting for each military location. It's possible that a long-term mode would be established with the adoption of Jet A fuel. A specific mode of shipment may stand out as more cost effective as resources devoted to JP8 transportation are shifted to a larger single pool of Jet A transportation resources. The reviewed literature offers some theoretical cost avoidance related to jet fuel shipments.

According to the Energy Information Administration more than 25 billion gallons of kerosene-type jet fuel was produced for U.S. consumption in fiscal year 2006 (EIA, 2008). Of those 25 billion gallons, the DoD JP-8 and JPTS requirements accounted for a total of only 3.4 billion gallons (DESC Fact Book, 2006). As a result, fiscal year 2006 DoD jet fuel purchases accounted for only 13.6 percent of U.S. jet fuel consumption. Therefore, elimination of one relatively low volume product should produce pipeline related efficiencies along the supply chain (C4e, 2007). Unfortunately, the only information pertaining to the JP-8 related efficiencies stems from a single source in the 2003 C4e study. Other efficiencies or reductions, such as the overall number of transportation vehicles or devoted personnel, are not likely to be sizable or may not exist at all due to JP-8 and Jet A having nearly identical properties. The scheduling of pipelines or barges would likely be much easier with a conversion to Jet A fuel with the large pool of assets and none devoted solely to JP-8.

According to the 2007 C4e study, two large volume pipelines and one small volume pipeline constituted 12.5 percent, 23 percent, and 24 percent respectively of turbine jet fuels total annual volume. Only 5 percent of the two large volume pipelines monthly volume averages were made up by JP-8. The study indicated that efficiencies related to operations flexibility and Jet A shipping rates of the two large volume lines were achievable, but failed to produce a quantifiable measure to support this statement. Even though the small volume pipeline JP-8 percentage was not shown, they did show a cost savings estimate of .02 to .025 dollars per gallon for a full transition from JP-8 to commercial Jet A at North American military installations (C4e, 2007).

In theory, a reduction in the number of stored, transported, and refined products should produce cost avoidance through a DoD-wide conversion from JP-8 to Jet A, but quantifiable measures are lacking. Without future research including an updated industry-wide survey, the answer to this question remains hypothetical. It's also possible that the shift in DoD demand to the same product in high demand by airlines throughout the U.S. could cause the price of Jet A fuel to go up. However, the dynamics of commodity pricing are beyond the scope of this research.

Can the aircraft or equipment fueled by the military installations of interest use Jet A in lieu of JP-8?

Although DoD aircraft fuels policy is primarily directed to USAF aircraft, it does address Army, Naval, and Marine airframes. It states, "In order of decreasing precedence, fuel for Army aviation applications is as follows: 1) JP-8/JP-5 & 2) Jet A/Jet A-1 with SDA, FSII, and CI (DoD, 2006)." Therefore, unless specifically stated, one can assume that all Army aviation applications can use Jet A as a primary or alternate fuel. This policy also states, "a) Authorized primary fuels for all Navy and Marine Corps aircraft: JP-5, JP8 & b) Authorized alternate fuels for all Navy and Marine Corps aircraft: Jet A, Jet A-1, and TS-1 (TO42B1-1-14, 2006)." Accordingly, our research assumes that all Naval and Marine airframes can use Jet A as an alternate fuel.

We included the gallons received and issued by aerial refueling aircraft in the totals for airframes that could use Jet A as a primary or alternate fuel. We did this based on prior results from the 2007 C4e Study and rely on the theory that the tanker missions are involved strictly in the support of primary aircraft operating out of the military locations of interest (C4e, 2007). However, C4e specifically addressed the F-22A Raptor and B-1B Lancer in their study, stating that Jet A-1 is approved as an alternate fuel for the F-22A, but Jet A is not. The seven degree centigrade freeze point differential between the two fuels could be the rationale behind this specification or perhaps Jet A usage approval was an oversight in the testing procedures. Either way, test models of the F-22A had a requirement for JP-8 to be refrigerated prior to take-off due to the unique heat sink requirements of the F-22 fuel system. Since pre and post take-off overheating of key components proved problematic without refrigeration, jet fuel freezing was found highly unlikely in missions flown over the continental United States (C4e, 2007). Likewise, Jet A-1, not Jet A, is approved as an alternate fuel in the B-1B bomber. Although its fuel system is not used as a heat sink, erroneous assumptions related to jet fuel usage, fuel additives, and freeze point are found multiple times in the B-1B technical manual. Therefore, the absence of Jet A usage approval in the technical manuals for these two airframes appear to be oversights rather than founded on test results. We recommend a revision of the F22A and B-1B technical manuals to include Jet A usage.

According to a test of almost 1600 JP-8 samples by DESC in 2006, only eight exhibited the minimum freeze point of -40_C and over 1,000 met or exceeded the -47_C requirement for Jet A 1 (C4e, 2007). Additionally DoD policy specifically states that Jet A or Jet A-1, with additives, are the secondary jet fuels of choice for all USAF applications (DoD, 2006). However, this document defaults the final discretion for primary or alternate fuel selection to the aircraft specific technical manual. With regard to previous research findings and results of DESC fuel testing, we established that Jet A is an acceptable alternative fuel for all USAF aircraft operating out of the six military installations of interest.

Are there large enough price differentials in the purchase price of Jet A and JP-8 for the DoD to recognize significant cost avoidance?

None of the six Pacific Northwest military locations of interest exhibited cost avoidance through a complete conversion from JP-8 to Jet A. A summary of the added costs associated with a complete conversion from JP-8 to Jet A is found in Table 7.

A 2006 contract was awarded to U.S. Oil and Refining Company for supplying McChord, Fort Lewis, and Yakima Firing Range. The final differential for Fort Lewis and Yakima Firing Range was .001300 dollars per gallon. This represents the difference between the price DESC paid for JP-8 (without additives and additional costing factors) and the price they would have paid for commercial Jet A fuel (without additives and additional costing factors. The derivations and calculations are shown in the Phase III: Price Analysis Methodology section. From October 2006 through September 2007, a complete conversion from JP-8 to Jet A would have imposed additional costs in the amount of $1,065,444.48 for McChord, $32,945.03 for Fort Lewis and $7,832.17 for Yakima Firing Range.

A similar contract was awarded to BP West Coast Products LLC to supply JP-8 to Fairchild, Whidbey Island, and Kingsley Field. The final differential between the base unit price and the base market price was .009870 dollars per gallon. From October 2006 through September 2007, a complete conversion from JP-8 to Jet A would have imposed additional costs in the amount of $154,654.15 for Fairchild, $90,590.01 for Whidbey Island, and $29,586.66 for Kingsley Field.

CONCLUSIONS

According to Universal Technology Corporation: "There are no significant aircraft operating penalties associated with using Jet A in USAF transport aircraft in CONUS. The few missions that would require changes because of temperature limits are not significantly affected themselves nor is there a significant effect when the individual mission impacts are aggregated across the fleets." (Bartsch, 2006:94)

Although freeze point did not exhibit any impediments to routine continental United States air transport missions, Jet A usage for aerial bombardment, fighter escort, and associated low temperature loiter times should be addressed in future research efforts. However, our research findings did not discern any chemical limitations associated with a conversion from JP-8 to Jet A. Thus, there appear to be no technical implications that would limit a full conversion from JP-8 to Jet A at the six military locations of interest.

Our methodology for comparing Jet A and JP-8 prices improves upon prior research to more accurately account for associated additive, transportation, and overall monthly refinery costs. As a result, a fair comparison of actual commercial and military grade jet fuel prices is made, versus using averages to account for base specific fuel prices, additive costs, and transportation charges. Our method was presented to and validated by a panel of subject matter experts from AFPET, DESC, and C4e. We found that although a conversion from JP-8 to Jet A fuel exhibits no technical inhibitions, the price of Jet A was actually more expensive than JP-8 in the Pacific Northwest during our study period--thus anticipated savings over the fuel conversion would have proved illusory.

Implications

The results of this research are counterintuitive to the way many of us are taught to view purchasing. In fact, earlier studies even indicated a cost savings associated with switching to Jet A fuel, versus the increased cost we show. Using conventional wisdom we would usually make the assumption that a customized product, made specifically to suit only our company's needs, would be more expensive. It turned out not to be the case. The main lessons here are: 1) When dealing with large quantities and small cost differences, everything counts! You can't rely on averages and estimates. Use actual costs whenever possible, as pennies per unit can add up to millions of dollars per year; 2) Know your product requirements and exactly what you're paying for in a replacement. Don't assume a replacement product will do everything you need it to do as it is. Determine the costs of any changes that need to be made to the product. In this study fuel additives were included in the JP-8 costs, but not the Jet A costs, so the playing field needed to be leveled. Previous studies did not do that; and 3) Mapping the supply chain effectively can bring to light either positive or negative effects of a corporate change before committing to something long-term that can't easily be undone. Every company consists of many players, and fundamental changes ripple up and down the supply chain touching each of them. If you don't know the impact of and on each of the players, you haven't done the necessary legwork.

Recommendations for future research

All JP-8 and Jet A prices for our comparison were based on Seattle's waterborne fuel shipments or similar prices. Unfortunately, mode specific pricing is not available through Platts and one of the prices we used for the West Coast areas is based on Seattle barge prices founded in Pacific Northwest markets. If Platts pricing data specifically accounted for Tacoma pipeline or tank truck shipments, much smaller price differences may be encountered.

Further research should be conducted concerning Jet A usage as a primary or alternate fuel. Since DoD policy recommends fuel usage in the manner presented in the specific aircraft's technical manuals, airframes such as the F-22A and B-1B have limited fuel options for trivial reasons.

If Jet A was ever determined to be the most economical choice for the DoD, additional JP-8 storage requirements would be necessary when conducting joint foreign exercises. Therefore, foreign aircraft manufacturer approval of Jet A usage is necessary to alleviate this likely future requirement.

Can the currently recommended additive percentages be reduced to more cost effective levels or eliminated without negatively effecting military aircraft? The current levels of additives required in JP-8 tend to be founded on random mishaps rather than concrete test results and empirical evidence.

The DoD sometimes proves to be a risky business partner with commercial jet fuel refineries. Commercial airlines buy much more fuel, in regular increments, and provide a much more predictable purchase pattern than the US Department of Defense. The US Government also enforces very stringent fuel specifications and defines relatively inflexible contract terms with very little room for contractor negotiation or grounds for escape. Furthermore, the US Department of Defense requires 30-day payment terms whereas commercial airlines are required to pay upon delivery. An updated survey should address these issues.

ACKNOWLEDGEMENT

The views expressed in this paper are those of the authors and do not reflect the official policy or position of the United States Air Force, Department of Defense, or the U.S. Government

REFERENCES

AFPET Plans and Programs Division. 2007. Contract Numbers, FAS Usage Data, and Distribution Supply Chain Overview. Electronic Message, 0941 EST, 4 December 2007.

Bartsch, Thomas M. 2006. Investigation of the Use of Jet A Fuel to Replace JP-8 in USAF Transport Aircraft. Unpublished Report Volume I. Universal Technology Corporation. Dayton, OH.

C4e, Inc. 2007. Investigation of the Logistics Feasibility and Cost of Using Jet A to Replace JP-8 at Charleston AFB. Report for Universal Technology Corporation and AFRL.

C4e, Inc. 2003. Enhanced Fuel Distribution System Study. Report for DESC.

DESC. 2006. Fact Book--2006. 29th Edition of Online Report. Available from: http://www.desc.dla.mil/DCM/Files/FactBoo k_FY06.pdf

DESC. 2008. Contract Solicitations. Online Database . Available from: http://214.17.0.94/DCM/DCMSolic.asp?Solic ID=1063

DESC Bulk Fuels Contracting Division, Business Meeting with Division Chief for Domestic Bulk Fuel Contracting Operations. 30 January 2008.

DESC Market Research Division. 2007. Section B14.04 for Contract Numbers SP0600-06-D 0502 & SP0600-06-D-0517. Electronic Message.

DESC Market Research Division. 2007. Platts Rocky Mountain/West Coast Pricing Data. Electronic Message.

Department of Defense. 2004. DoD Management Policy for Energy Commodities and Related Services. DoD Directive 4140.25, Washington: GPO.

Department of Defense. 2006. Fuels for USAF Aircraft. DoD Technical Order 42B1-1-14.

Energy Information Administration. 2008. Petroleum Navigator--Product Supplied. Online Database. Available from: http://tonto.eia.doe.gov/dnav/pet/pet_cons_p sup_dc_nus_mbbl_a.htm

Wynne, Michael W., Secretary of the Air Force. 2007. The Air Force: Leading the Way to Energy Conservation. Remarks to the Air Force Energy Forum, Arlington, VA., 8 March 2007.

AUTHOR BIOGRAPHY

Lance A. Vann, B.S., M.S., is chief, Air Transportation Transformation, HQ AMC/A4TD, Air Mobility Command. His research interests are in the areas of fuels and transportation.

AUTHOR BIOGRAPHY

Bradley E. Anderson, B.S., M.S., M.B., Ph.D., is an assistant professor in the Department of Operational Sciences at the Air Force Institute of Technology. His research has appeared in Pursuing Waste Vegetable Oil as an Alternative Fuel, Harvey Gaber, Bradley Anderson, Production and Operations Management Society (POMS) Annual Conference Proceedings. Dr. Anderson is coauthor of a chapter appearing in Methods for Conducting Military Operational Analysis. His research interests are in the areas of energy security, supply chain management, deterministic optimization, forecasting, and inventory management.

AUTHOR BIOGRAPHY

Alan W. Johnson, B.S., M.S., Ph.D., is an associate professor in the Department of Operational Sciences at the Air Force Institute of Technology. His articles have appeared in Computers and Industrial Engineering, SOLE Spectrum, and Journal of Spacecraft and Rockets. Dr. Johnson's research interests are space logistics, strategic mobility, discrete-event simulation, logistics management, reliability and maintainability, and discrete optimization and heuristics.

Lance A. Vann

Air Mobility Command

Bradley E. Anderson

Air Force Institute of Technology

Alan W. Johnson

Air Force Institute of Technology
TABLE 1
STANDARDIZED AND SORTED JP-8 ISSUES FOR MCCHORD AIR FORCE BASE

McChord JP-8 Issue Summaries

TMS Code Jet A Compatibility Info Gal Issued Percentage

C017 Jet A w/FS II approved for use 38,154,027 83.23
C130 Jet A w/FS II approved for use 799,659 1.74
C005 Jet A w/FS II approved for use 483,264 1.05
E003 Jet A listed as approved alt fuel 462,944 1.01
MD011 Comm A/C commonly using Jet A 346,795 0.76
B757 Comm A/C commonly using Jet A 202,449 0.44

TABLE 2
SUMMATION OF APPROVED/UNAPPROVED JET A USAGE

McChord JP-8 Issue Summaries

TMS Code Jet A Compatibility Info Gal Issued Percentage

F018 Jet A is auth alt fuel for 1,355 0.00
 all Navy-Marine A-C
 (TO 42B1-1-14)

C002 Navy Cargo A/C/Jet A is 1,347 0.00
 approved alt

T0 06 Jet A w/FS II approved for 394 0.00
 use

Non-Fly Freeze point not a problem 355,932 0.78
 (ground equip., generators,
 etc.)

Subtotal Jet A is an approved primary 41,988,478 91.60
 or alt fuel

KC130 Jet A w/additives approved 131,514 0.29
 for use

KC135 Jet A w/FS II is approved alt 1,436,501 3.13
 fuel

KC0 10 Jet A w/FS II is approved 127,443 0.28
 primary fuel

Subtotal Jet A w/additives may not be 1,695,458 3.70
 approved for all receiver A/C

Total Jet A approved for above A/C 43,683,936 95.29

 Operating Manuals are not 2,157,140 4.71
 available for the following
 aircraft, does not address
 Jet A use, or no TMS code

Subtotal Data not available to 2,157,140 4.71
 determine authorized Jet A
 usage

Grand Total All JP-8 issues at McChord 45,841,076 100.00

TABLE 3
DIFFERENTIAL THROUGH SEPTEMBER 2007

 Initial
Item/Mode BUP BMP Differential

0101/TT (Ft Lewis & Yakima) 1.857217 1.847317 0.009900
0201/PL (McChord) 1.870917 1.847317 0.023600

 Final
FSII/CI/LI SDA Trans Differential

0.008500 0.000100 0.000000 0.001300
0.008500 0.000100 0.025000 -0.010000

TABLE 4
PLATTS 5-DAY MIDPOINT PRICING AVERAGE

 JetKero Los JetKero JetKero
 Angeles Pipe San Francisco Seattle Barge
 (USC) Pipe (USC) (USC)

Date Midpoint Midpoint Midpoint

02/06/2006 192.3750 192.3750 192.3750
02/07/2006 186.9500 186.4500 186.9500
02/08/2006 183.0500 182.5500 183.0500
02/09/2006 182.4500 181.9500 182.4500
02/10/2006 179.5000 179.0000 179.5000
 Average ($/gal) 1.847317

TABLE 5
PLATTS 5-DAY LOW PRICING AVERAGE

 JetKero Los JetKero JetKero
 Angeles Pipe San Francisco Pipe Seattle Barge
 (USC) (USC) (USC)

Date Low Low Low

02/06/2006 192.0000 192.0000 192.0000
02/07/2006 186.7000 186.2000 186.7000
02/08/2006 182.8000 182.3000 182.8000
02/09/2006 182.2000 181.7000 182.2000
02/10/2006 179.2500 178.7500 179.2500
 Average ($/gal) 1.844567

TABLE 6
DESC JET A EQUIVALENT PRICE CALCULATION

 LA SF Seattle
 Pipe Pipe Barge
 Low Low Low

DESC Jet A Equivalent 10/23/2006 176.1500 176.1500 176.1500
Platts Low + APF + 10/24/2006 181.3500 181.3500 181.3500
 Cost of Money 10/25/2006 187.7500 187.7500 187.7500
 10/26/2006 184.000 184.0000 184.0000
 10/27/2006 184.8500 184.8500 184.8500

 Average 1.828200
 Airline Pricing Factor (APF) 0.002250
 Cost of Money 0.012397
 Price 1.842847

TABLE 7
ADDED COSTS ASSOCIATED WITH A JET A CONVERSION

Base Gallons Used Line Item/Mode Added Costs ($)

McChord 45,841,076.00 0201/PL 1,065,444.48
Fort Lewis 2,758,722.00 0101/TT 32,945.03
Yakima Firing Range 655,843.00 0101/TT 7,832.17
Fairchild 45,862,382.00 0101/TK 154,654.15
Whidbey Island 26,864,288.00 0101/TK 90,590.01
Kingsley Field 8,773,864.00 0101/TK 29,586.66
Total 1,381,052.50
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Author:Vann, Lance A.; Anderson, Bradley E.; Johnson, Alan W.
Publication:Journal of Transportation Management
Article Type:Report
Geographic Code:1USA
Date:Mar 22, 2009
Words:6778
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