Does it do any good to complain to the MONOPOLY?

Capt. Jones, on behalf of the AAFES Commander, I would like to thank you for
the opportunity to respond to your concern about gas pricing on Okinawa. I
appreciate your concerns and share the frustration as prices continue to
drop stateside but not here, nor in Japan. Please let me try to explain the
AAFES gas prices on Okinawa, as we discussed earlier on the phone this
morning...



The Office of the Secretary of Defense (Comptroller) determines the standard
gasoline prices for the fiscal year through the Defense Energy Support
Center (DESC). The standard fuel prices are set to support military service
budgetary stability requirements, not to vacillate according to local market
prices. This price is not a marketplace price and we cannot compare the
standard price of fuel with the price of fuel at local service stations, nor
is it intended that the standard price of fuel be comparable with similar
fuels in the commercial marketplace (please see the attachment). The Defense
Working Capital Fund (DWCF) is a revolving fund, not tied to fiscal years,
that must remain solvent (always have money in the account) so DESC can
continuously buy fuel globally.



To keep the Defense Working Capital Fund (DWCF) solvent (to allow DESC to
continue to buy fuel globally) OSD did some fairly unprecedented changes in
the last two years. Normally, the price only changes yearly to allow the
military services to create their annual budget, but because the markets
were so volatile, the DWCF ran out of money very quickly and OSD had to
increase the prices.



From Dec 07-July 08, the fuel was $3.13 (AAFES price was $2.99). Knowing
market prices during this time, DESC was selling at a large loss for a long
time. Multiply that globally and it depleted the DWCF quickly. The
relatively cheap gas DESC can buy in some places is counteracted by the
expensive gas they have to buy to support Afghanistan or places in Africa.
OSD rolls that to an average (standard) price to keep the DWCF solvent and
keep the budget stable for the military services. This fuel is not meant to
be sold commercially, it's meant to support our warfighters. However, AAFES
buys gasoline from the DESC in Japan.



Since July 2008, AAFES has bought midgrade unleaded gas from the Defense
Energy Supply Center for $4.19 and adds .12 per gallon to cover local
dispensing costs, bringing the actual fuel cost price to $4.31. A government
of Japan subsidy of 25 cents per gallon is subtracted, leaving $4.06 per
gallon; the price customers see at the pump.



Knowing this pricing model makes a difference as it relates to AAFES prices
at the pump in Japan and on Okinawa. Japan is in a unique situation in that
it's the only country where AAFES buys fuel from DESC to sell commercially
simply because AAFES cannot get a cheaper price anywhere else.



I trust this explanation helps you to understand why our prices continue to
be $4.19 at the pump. We are expecting some help from the OSD to make a
change in December to lower their cost to AAFES. If they do, we will
certainly pass along the reduced price at the pump to our valued customers.
Thank you.



Jerry L. Broccoli