Defense One reports that with crude oil prices dropping, the Department of Defense may save money currently allocated to fuel costs, which could then be reallocated through the Operations and Management budget to other priorities.
Saudi Arabia, United Arab Emirates, Kuwait, Qatar and Jordan have all been increasing defense spending in recent years….these countries are expected to collectively spend $30 billion on new weapons in 2015 and $165 billion over the next five years.”–Avascent Analytics
However, the department responsible for purchasing fuel for the services, the Defense Logistics Agency (DLA), has fixed the price of the oil it sells to the services at $134 a barrel over the next five years to insulate the military from extreme fluctuations in price. Which means that although crude oil is approximately $60 a barrel at present, DoD will not realize immediate cost savings. Instead DLA will likely hold onto those savings to avoid having to charge the military in excess of $134 a barrel should prices exceed that number between now and 2019.
“But while these low prices could be seen as a positive at the Defense Department, they could hurt U.S. weapon sales to oil-rich Middle Eastern countries, which have been the prime target of American defense companies looking to make up for a decline in Pentagon sales. It is also possible the drop in oil prices could trigger further instability in the volatile region, leading to more American forces deploying there.”