Skyrocketing fuel prices have stressed the Department of Defense's
budget in recent years. In 2001 the DoD spent $4.7 Billion on fuel
with the Air Force consuming $ 2.7 Billion (GAO, 2001). These
figures have grown over due to these increases as well as the
increased flying ours to support the Global War On Terror. In fact,
the Fiscal Year 2007 budget has already been increased by $1.1
billion, or 1% of the total budget, to accommodate the increased
price of fuel (SAF/FMB, 2006). Current forecasts of this resource
have yielded poor results, impairing the DoD's ability to budget
this critical expense. Further because the forecast are poor,
strategic hedging strategies cannot be effectively employed.
Because fuel is a significant portion of aircraft operations and
maintenance cost it should be considered in the acquisition of new
systems, but the current forecast have not provided the accurate
data required. Current forecast available to the DOD were examined,
and compared to two econometric structural forecast models. The
performance of these structural models was then compared to the
benchmark forecasts for energy provided by the Energy Information
Agency. A consensus price forecast was constructed from these
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