Fuel From Coal

[More Power]

Those who watched Glenn Beck on CNN last evening (4/28/08) probably saw Glenn’s interview with Montana’s Governor Brian Schwitzer about a proposed synthetic fuels project here in Montana and in other states. According to the Governor, the U.S. imports approximately 4 billion barrels of oil every year. Going further, the Governor said that there is enough coal within the U.S. to produce 4 billion barrels of synthetic oil annually for the next 200 years.

When asked why the synthetic fuels project isn’t being rushed to completion, Schwitzer said that the financial backers and developers are waiting for Congress to define what carbon regulations are coming. He said the syn fuels people don’t know if there’ll be a $10, $20 or more carbon tax added to each barrel of synthetic crude. This uncertainty is the reason for the delay. Synthetic oil can be produced for somewhere between $40 and $55 per barrel.

So, it would appear that the green crowd has the political clout to prevent Congress from acting, and this demonstrates the power of the green movement. While the U.S. suffers from unprecedented oil prices, looming recession, high food prices, and the long history of enriching those who would do us harm by buying their oil, the Congress wants to continue with business as usual. If Congress wanted to reverse the trend of high oil prices, they could do it today – this very day, and the U.S. would be completely energy independent.

One question I have (other than what sort of crazy carbon tax there might be) is would U.S. synthetic oil derived from public lands be priced at the world market level or would it be based on cost plus a reasonable profit?

Jim

[16gaSxS]

Pricing would be based on market price as Oil and Natural Gas is.

The Air Force just had meetings here in Great Falls concerning building a Synthetic Fuel plant for their Jet Fuel needs here in Great Falls at Air Force base here using Montana coal.

[HH]

Or would it cause competition for imported oil and bring the price down, and/or also be exported?

The technology to make fuel from coal has been around since at least WWII, the Germans used it.

[More Power]

If - if a significant amount of U.S. coal-derived petroleum were put into the "world market" it would temporarily reduce the price of "world market" oil perhaps a buck or two... The world is using nearly 87 million barrels per day. Any drop in oil price would benefit China, India, Russia et. al. as much as a U.S. coal-to-oil program would benefit you and me - in a "world market". The same applies to drilling in ANWR.....

Jim

[TheJDMan]

It's not the green movement blocking syn fuel developement, it is the current administration and the big oil companies not wanting the competition and thus protecting their profits.

[More Power]

According to Montana's Governor Brian Schwitzer (a Democrat), the "holdup" is because the investors don't yet know what will develop with the upcoming carbon tax laws (i.e. Lieberman-Warner "cap and trade" America's Climate Security Act (ACSA) of 2007 (S.2191)). This law won't likely make it past the current administration's veto pen, but all three of the current presidential candidates support it. If passed, this act is expected to increase gas/diesel fuel costs by $1.50/gallon.

As a result of (threat of) Lieberman-Warner, the coal industry is bracing for another $18B in carbon (CO2) taxes. Any punitive increase in taxes could stop the coal/oil program before it ever begins.

Meanwhile, China is slant-drilling 50 miles off the FL coast. By the way, "slant drilling" is a method of extending the lateral reach for a drilling platform, which allows it to reach oil quite a distance from the drill site (toward the U.S.). We can't drill off the southern FL coast because of the green crowd and Congress, but China can. :( The Chinese oil will likely move through the Panama Canal, which was built and paid for by the U.S.A., then given back to Panama. What an upside down world we live in.....

So, I would blame Congress - not the current administration or the oil companies.

Jim

[afgunn]

I saw the Schwitzer interview but did not see all of it. I first read about this in Diesel Power Magazine over a year ago. I was wondering what was holding up this program and now I know. I thought that maybe it had to do with strip or open pit mining of the coal.:( Glenn Beck also recently mentioned the drilling off Florida by China.

China is building 2 coal fired power plants a week, Europe has 30 in the works and France... FRANCE... gets 70 percent of their electricity from NUCLEAR! But not in America. Any wonder that China was excluded from the Kyoto Accord!!!!!

I do not think we can drill/pump oil in this country and expect to pay less than the world market. A cap on oil prices was tried in the 80s with terrible results - no exploration or drilling - no incentive! Some of the current price we are seeing in oil, corn, soybeans, etc. is due to speculators in the commidities market. With oil it also has to do with world demand surpassing world supply and the devaluing of our dollar. And this will not go away! China and Indina are purchasing a million cars a year (or month, I do not remember). Every administration since Nixon has promised that they would get America energy independent. None has delivered! In fact we are now more dependent than ever!:mad:

Alternative fuels would be sooo... good for our country. And not just for energy independence, which is very important. But also for ALL the jobs that it would create.

I am going to say some things here that many may not agree with. I truly believe that liberals want to destroy the USA that I know, love and served. They will definitely say that they do not but I judge people by their actions and outcomes of their policies and not by what they say. And they must dislike the poor as well because their policies hurt them the most. Some examples may help here: Federal Deficit spending, Federal Debt, War on Poverty, Alar, DDT, Kyoto Accord, no drilling for oil, no nuclear power plants, no new refineries, no alternative fuels, Global Warming, Ethanol Program, Carbon tax, restrictive regulation, suing in court to stop anything they do not agree with, Cap and Trade Bill, etc., etc., etc.

A little history may help here as well. In the not too distant past an obscure lackluster former army corporal was ELECTED Prime Minister and later GIVEN power as Supreme Chancellor of his country. He then started to purge and cleanse his country of any "undesireables" - all with the consent and support of the people of his country. And he was the "darling" of the liberals in this country, America, until what he was doing to the Jews leaked out! Who was this? For those of you who do not know by now - it was Hitler!

For a democracy or a republic, as America is, to succeed requires an educated and informed public. In America, we no longer have a majority of either. Our children are no longer educated in public school or college they are indoctrinated! In our colleges Marxism is praised, "From those who are able, to those in need." Anyone experienced this?! And the 4 major news networks (ABC, NBC, CBS and CNN) do not inform, they spew propaganda. And you only know this if you are listening to conservative tv or listening to conservative radio to get the rest or other side of the story. When a news agency does not report THE NEWS but instead reports what fits their agenda by cutting and clipping that is not news - it is propaganda.

So this is what we are up against in this country now - in every area - not just energy. And I am not optimistic.:( Governments do not solve problems (they mostly create them) - inventors and entrepreneurs do - when "allowed to" by their government.

Pray for our country. Pray for revival.

[More Power]

Oh boy..... Pitting liberals against conservatives here in the board will end in a big mess. I know both are here now.... Let's not go there...

I disagree with the notion that US oil can't become US market-based. Most of our domestic businesses are already largely US market-based. Examples would include the auto industry, the housing industry, the food industry and so on. The price of milk in a local grocery store doesn't reflect the milk price in France. There may be some effect due to the price of grain or steel or ??, but most retail/wholesale US industries are controlled by local and US markets. What they charge is based on competition and what consumers will bear.

We've heard that since the dollar devaluation, we're exporting more stuff because our products are less expensive to the rest of the world. This is so because we have a US Market based economy for most things.

The oil companies say they make an 8 or 9% profit. I say fine, let them continue with at least an 8-9% profit margin - or more. Pulling oil out of the ground in west Texas or possibly ANWR doesn't/wouldn't cost them $130/bbl. Gov Brian Schwitzer has said oil produced by a coal liquifaction plant will go out the door at $40-55 per barrel. Let the oil companies make an 8-9% profit on it. The US uses 20 million barrels per day. If the oil companies made a 10% profit on each $50/bbl of oil, that's still a lot of profit...

US oil companies profitably supplied gas/diesel to US consumers long before the first foreign oil tanker docked at a US shore.

And finally, the green crowd and many in Congress shriek when asked about drilling in ANWR. We're told how pristine the area is - the poor polar bears, it's a last best place, we're told. The oil execs tell us that without exploration and drilling, oil prices will continue to climb. I don't know about you, but I'd be pissed if they were finally allowed to drill ANWR oil, then watch as the tankers disappear over the horizon on their way to Asia - by putting that million barrels a day on the "world market". Who would benefit from exporting ANWR crude?

Jim

[More Power]

With oil prices at record highs (currently $132+/bbl), who profits when the price of oil increases? Certainly the speculators do, but so do the oil companies and the federal government.

The oil companies profit greatly from the oil pumped from domestic sources. They don't profit (as much) on imported oil. Oil pumped from US federal lands and coastal waters was profitable at $30/bbl, but a world-market based system means that ~$30/bbl domestic oil in 2004 is now worth $130+/bbl. The U.S. is currently pumping a little more than 5 million barrels per day.

The federal government sells leases to oil companies extracting oil from federal lands and coastal waters. Those leases include a 12% royalty. See this link (http://www.nytimes.com/2007/01/17/washington/17royalty.html) to learn more about oil lease royalty percentages and how more than 1000 Gulf oil leases sold in the late 90's didn't account for the increase in the market price of oil.

Jim

[More Power]

As of June 2008, diesel & gas prices in Mexico (http://www.mexicomike.com/database/runner/public/mx_fuel_prices_list.php) are: diesel $2.54 gallon - gasoline $2.64 gallon.

This (much lower gas/diesel fuel cost) is how it should be in countries that do not rely on imported (world market-based) crude oil. Fuel prices in Canada should be similar to those in Mexico. If we were energy independent, our fuel costs could be as well.

Jim

[afgunn]

http://www.thedieselpage.com/dieselprices.htm
Excellent article Jim. I wanted to point out some of these things but I did not have the time to do the research and your research is much more extensive than mine would have been.

Go to the link below to let your elected officials know what you think about dirlling now.
http://www.americansolutions.com/actioncenter/petitions/?Guid=54ec6e43-75a8-445b-aa7b-346a1e096659

I got a report last week that shows over the last 6 years, if you were buying your oil in:
gold - the price increase would be 51% (x1.5)
euros - the price increase would be 92% (~ x2)
dollars - the price increase has been 319% (> x4)

So, the largest increase in oil prices (and all imports) is/will be due to the devaluing of our dollar. Speculation and world demand do play a part as well. I do agree and believe that we should stop ALL exports of ANY energy products! And it does seem that not importing oil should lower our fuel costs (how much I do not know) at least because we are not paying the costs of transporting the oil to the US. I would not agree with any government regulation or control other than to stop ALL exports of energy of products. And this may be problematic. I know of no program that the government runs in an efficient cost effective manner. And regulating oil prices would be no different. Incentive for exploration and drilling would evaporate.

I do not see how fuel prices could be held well below (50 - 75% lower) the world prices without government regulation - and I am against that. Oil like corn, wheat, soybeans, etc. is a world traded commodity and their prices are set based on world market demand. I do see how fuel prices could be held low by competition from bio-fuels and alternative fuel vehicles. The government needs to get out of our way and allow inventors and entrepreneurs work. But then, a certain group will sue in Federal Courts to stop any company that attempts to drill, build a refinery, open a new industry, build a nuclear power plant, etc., etc. So, why should a company spend tens or hundreds of thousands of dollars fighting in the legal system to accomplish something that they can do without this in another country?

ANWR
I agree, I would be very upset to see oil from ANWR being shipped overseas. However, we are already shipping oil from the Alaskan Pipeline to Japan and Asia. To Japan because they helped finance the building of the pipeline.

Energy Exports
I do not want ANY fuel products exported. I say that because I consider it a financial and strategic security issue. We are exporting bio-diesel and diesel fuel to Europe. Several times on the radio it has been reported that diesel fuel prices are so high because we do not have enough refining capacity for diesel fuel and the reason for this goes back to WWII. Oh, yea!? Then, WHY are we exporting diesel fuel and bio-diesel fuel to Europe! Why?! I think because more money can be made by selling the fuel to Europe instead of keeping it here in the US.

Splash and Dash Program
With bio-diesel to Europe, we the taxpayers, are once again getting ripped off by the "splash and dash" program. Bio-diesel mixed with diesel fuel gets a subsidy so.... A recent report stated that 900 million gallons of bio-diesel was IMPORTED to the US, "splashed" with 9,000 gallons of diesel fuel (1% diesel fuel) and "dashed" to Europe - after qualifying for and getting the financial subsidy! I wish I knew how much home grown bio-diesel was being shipped to Europe.

Not very hopeful
With both presidential candidates saying they will not allow drilling in ANWR and supporting the carbon tax, I am not hopeful! I have not heard how they stand on nuclear power, coal and alternative fuels!? And all of this WILL take time - there is no quick fix now! We are stuck for the near future!