Background on Standard Prices
The standard price of fuel is a tool that was created by Department of Defense fiscal managers to insulate the military services from the normal ups and downs of the fuel marketplace. It provides the military services and the Office of the Secretary of Defense with budget stability despite the commodity market swings, with gains or losses being absorbed by a revolving fund known as the Defense Working Capital Fund. In years that the market price of fuel is higher than the standard price, the DWCF loses money. In years that the market price is lower than the standard price, it makes money. This gain or loss can be made up by adjusting future standard prices or by providing our DoD customers with a refund. This decision is typically made by the Office of the Secretary of Defense Comptroller. However, the DWCF must remain cash solvent. As a result, in rare instances the standard price is changed during the fiscal year so the fund remains solvent.
The standard price is established well in advance of the fiscal year it is used. It is built by assembling the following blocks:
- A projection of the price of fuel 18 months in the future. In the late fall the standard price is determined for fuel that will be sold to DLA Energy customers during the fiscal year. For example, in the fall of 2012 the price is set that will be in effect from October 2013 through September 2014.
- The budgeted cost of transporting, storing and managing the government fuel system, including war reserve stocks and some adjustment to these costs, reflects whether the revolving fund lost or gained money during the previous years.
The standard price of fuel is not a marketplace price. You cannot compare the standard price of fuel with the price of fuel at the service station down the block. It is not intended that the standard price of fuel be comparable with similar fuels in the commercial marketplace.
Standard Prices are normally published before the start of the new fiscal year commencing annually on Oct. 1. This page is also updated when Standard Prices are officially changed and published during the current fiscal year.