How much does AAFES actually pay for a gallon of gasoline?
Stars and Stripes March 23, 2008
Ever wonder what the Army and Air Force Exchange Service pays for a gallon of gas?
Right now in mainland Japan and Okinawa, AAFES is paying almost as much as its customers for gas, but only recently.
AAFES in Japan purchases gasoline from the Defense Energy Support Center.
Costs for wholesale midgrade unleaded fuel rose from $2.35 to $3.13 a gallon on Dec. 19, according to AAFES officials.
Diesel wholesale also went up, from $2.26 to $2.97.
But AAFES officials like to steer discussion about gas prices away from the wholesale aspect.
“Discussion of ‘wholesale prices’ unfortunately, continues to advance a long held, but inaccurate, perception that pump prices are in some way related to ‘cost,’” wrote AAFES spokesman Judd Anstey in an e-mail to Stars and Stripes.
Overseas, gas prices are based on the Energy Department’s weekly retail nationwide average for each grade of gasoline in the continental U.S., plus AAFES’ incremental dispensing costs — about 11 cents per gallon in Japan, according to AAFES officials. In Japan, a 25-cent discount is added to the formula.
But wholesale costs do enter the mix — only, however, when it costs AAFES more to buy and provide gas than the retail price on the U.S. market.
When those circumstances arise, overseas pump prices reflect “floor pricing” — wholesale plus dispensing costs — according to Anstey.
Floor prices kicked in for a period after Dec. 19, according to AAFES officials. For example, in February, midgrade unleaded fuel at AAFES pumps in mainland Japan and Okinawa held steady at $2.995 per gallon, while for the week of Feb. 11, the Energy Department’s weekly average was $2.824. If AAFES adhered to its market pricing policy in Japan — the Energy Department weekly average, plus an 11-cent dispensing cost, minus a 25-cent Japanese government discount — then fuel for that particular week should have been about $2.68 a gallon.
In South Korea, wholesale costs fluctuate with the price of oil and can change at any given time, Anstey said. AAFES as of March 13 was paying between $2.6256 and $2.6406 for regular gas in South Korea, depending on location.
Wholesale costs in Guam are based upon a monthly benchmark average, Anstey wrote. Earlier this month, regular was $2.8507 and premium was $2.9852.
AAFES officials say the market-based policy overseas, as approved by AAFES’s military board of directors, is an effort to provide pump prices that are a reflection of the U.S. economy, according to Anstey.
Stateside retail prices include on average 13 percent in federal and state taxes, according to the Energy Department. AAFES pays motor fuel taxes in the States and in some overseas locations such as Guam, a U.S. territory.
But tax or no tax, market-based pricing applies equally to all locations.
“Failure to include taxes in select locations would create a disparity between the prices troops find in the states compared to those overseas,” Anstey wrote. “AAFES is not in a position to create special benefits for select groups based on geography.”
Despite extending a 25-cent-per-gallon discount on retail gas sold in Japan, AAFES still generated a gross profit of nearly $7.5 million on Japan fuel sales in fiscal 2007, according to Anstey.
Anstey points out that historically AAFES earnings are returned to the military community in one way or another. Last year, the company returned $232 million in dividends to the military worldwide, according to Anstey.