Loss of mitochondria might contribute to a loss in the ability to oxidize fat. But even before the precise mechanisms are understood, there's good news for elderly people. The paper mentions that an intensive 16-week exercise program helped the elderly subjects oxidize fat more like younger participants. It comes back to about where it is in younger adults. Apparently, training either corrects the defect or compensates for it in some way.
Normal muscles use two sources of fat.
It is broken down and released into the bloodstream, which delivers it to muscles. The second source of fat comes from muscles themselves. Muscle tissue contains its own triglyceride droplets, so it can oxidize fat as a fuel directly during exercise. This study did not determine whether aging muscles have more trouble oxidizing fat from the bloodstream than fat stored in muscle or vice versa, but Klein now is starting to evaluate the use of intramuscular triglycerides and plasma fatty acids during exercise in elderly subjects.