US Defense Department switching to civilian-grade jet fuel

The US military is jettisoning its jet propellant in favor of civilian-grade jet fuel.

With testing of civilian-grade jet A with additives nearly complete, 36 military bases in the US have converted away from the military-grade JP-8. T he remaining more than 230 locations are slated to convert in 2014.

"For the conversion in the continental United States, the demonstration phase of the conversion is essentially completed," said Susan Lowe, a spokeswoman for the Defense Logistics Agency Energy, the fuel-buying arm of the Department of Defense. "Virtually all DOD aviation and ground equipment has been tested and (is) ready for the use of commercial specification jet A fuel with additives."

The two main exceptions to the conversion are jet A-1, a civilian grade nearly identical to JP-8 that is commonly used by the military outside of the US, and JP-5, which is mainly used on aircraft carriers. Jet A-1 has the same flash point as jet A but a lower freezing point: jet A freezes at minus 40 degrees Celsius and A-1 freezes at minus 47 degrees Celsius. The requirement of an antistatic additive for A-1 is another major difference, while JP-8 further requires corrosion inhibitor and icing inhibitor additives.

The DoD began the initiative in 2009 with demonstrations at four Air Force locations. One market source said the additives put into the jet A bought by the military during the early testing period made it almost identical to JP-8 at first, and that few suppliers could meet the requirements. But he said the military was realizing it does not need the superior freeze point, or that it may even get the spec thrown in for free later.

The DOD bought 73.32 million barrels at a cost of $12.21 billion for jet fuel globally in 2013, a purchase similar to that of Delta Air Lines and United Airlines, the world's largest commercial airlines before the newly merged American Airlines was created.

But market sources say the addition of military demand to the civilian market will not drive prices up, because producers that usually make JP-8 for the DOD can simply make more jet A--also known as 54 grade--to offset the new demand. JP-8 producers will lose premium pricing for the special handling involved, but the jet A supply chain will gain more flexibility.

"Some places, they want to sell us JP-8 because they have a government contract," said one jet fuel buyer for a major US airline. "Now, if they do the regular 54 and additives, I think it will help us."

The Platts spot market assessment for jet A in the benchmark US Gulf Coast averaged $2.9227/gal in 2013, and US airlines paid $3.01/gallon, according to data released by the Bureau of Transportation Statistics. The military paid $3.73/gal for JP-8, and $3.71/gal on A-grade jet fuel plus additives, according to information provided by the DLAE. The 2-cent/gal spread would have saved the military $37.34 million if all JP-8 bought in 2013 had been jet A plus additives.

DoD savings could become more dramatic once the entire system shifts away from needing special distribution and segregated storage. Access to the civilian supply pool, Lowe said, "gives the DOD more operational flexibility and increases procurement competition to reduce fuel costs."

US refiners and blenders produced an average of 105,269 b'd of military-grade jet fuel and 1.4 million b/d of jet A in 2013. This marked a decline in JP-8 production from 2012, when it averaged 124,250 b/d. Government data showed only 75,000 barrels a day of military jet production occurred in the week ended February 7, 2014, which is only 5% of total jet fuel output in the US. Both levels are half the average since the 1993 start of data collection.

In 2013, the military spent $6.95 billion on 44.45 million barrels of JP-8 and $860.72 million on 5.53 million barrels of A-grade with additives. The biggest military buyer of the civilian-grade jet fuel was the Air Force, which spent $838.20 million on 5.38 million barrels.

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