Pentagon overbills US military for fuel to pour surplus into ‘slush fund’ – report

The Department of Defense amassed $ 6 billion over the past seven years by billing the US armed forces excessive prices for fuel, the newspaper reports, citing official documents. The rates were often much higher than those paid by commercial airlines for jet fuel. 

Since World War II, the Department of Defense, which is the largest single consumer of fuel in the world, purchases all of its fuel – around 100 million barrels of refined petroleum annually – and resells it at fixed prices to the Air Force, Navy, Army, and Marine Corps. To procure fuel, each branch of the US military pays for it out of their own budgets.

The military’s standard fuel price is set by the Pentagon’s comptroller in consultation with the Defense Logistics Agency and the White House’s Office of Management and Budget. But the Pentagon raised the fixed fuel price even at times when energy markets were in decline, the newspaper reported.

“We’ve been complaining about this,” Ray Mabus, a former Navy secretary, told the Washington Post. “But if we do it too loudly, oh man, they come back on us really hard.” Other Navy officials, who vocally opposed the Pentagon’s scheme, said the surplus fund is known as a “bishop’s fund,” and is controlled by the office of the defense secretary.

“Another word for it is ‘slush fund,’” said Mabus, who served as a Navy secretary for eight years under the Obama administration.

In one case, in April 2013, John P. Roth, the Pentagon’s acting comptroller and chief financial officer, informed the armed forces that the standard fuel price would go up next month by 27 percent, from $ 3.73 to $ 4.72 per gallon.

At that time, fuel prices on the open market had been going down, and commercial airlines were paying $ 3.05 per gallon at the time, according to data from the Bureau for Transportation Statistics cited by the newspaper.

In 2015, when petroleum prices were plunging, the Pentagon managed to make an even bigger surplus, transferring an extra $ 1.2 billion to other military accounts.

Around $ 80 million were allocated to the Pentagon’s program to train and equip Syrian rebels fighting Islamic State (IS, formerly ISIS/ISIL), records show. The program, designed to train 5,400 fighters, produced little results, as only 150 militants were trained. Others were killed or captured by Islamists or deserted.

In all, the Pentagon has withdrawn $ 5.9 billion from the ‘slush fund’ since 2011, according to Defense Department figures. Almost all of the surplus was generated from fuel savings, defense officials told the newspaper.

Roth, the Pentagon’s acting comptroller, defended the practice, saying it is normal to “balance out manageable shortfalls and surpluses” that invariably arise each fiscal year. Congress “expects us to solve most of our problems ourselves without coming back and asking them for more money,” he said.

He refused to admit that the Pentagon was capitalizing on fuel prices to fill the ‘slush fund.’

“It’s not a bishop’s fund and we don’t keep a bishop’s fund,” he said, noting that if it was indeed the case, he personally would make “a hell of a lot more money.”