In February the price of oil had settled in at over $100 a barrel. Gasoline and diesel are at all-time highs in America and are reasonably predicted to go higher. As a consequence, the high price of oil is starting to work its way through every sector of the American economy, and the resulting inflation will reduce the buying power of all Americans, especially those who already live on the margin. But much worse-and potentially fatal to America-is our dependence on foreign oil, a very dangerous situation that will only worsen as supplies of petroleum dwindle, production costs rise, and per barrel price increases push oil higher and higher.
It is past time for the American people to understand that a barrel of oil is not a television set, a DVD player, or a pair of running shoes. These latter are consumer goods sold in competitive markets; they are free market products, and I am very much a Free Marketeer. In free markets producers make what eager buyers want to buy. Supply is virtually unlimited and the consumption is determined by price, innovation, technological advances, and fashion. But oil is not a free market product. It is priced by an oligopoly comprising the members of OPEC and serviced by the major oil companies who produce, refine trade, and distribute the products of petroleum, and who benefit from higher oil prices. The oligopoly controls supply to keep prices high, and consumers of petroleum products are completely at their mercy.
In recent years two other factors have entered the supply-demand-price equations for oil: The exploding demand for oil by third world countries, led by China and India, and production shortfalls, either contrived or inevitable.
The elasticity of demand for oil is extremely low precisely because it is essential for transportation and heating. People (and nations) must continue to buy gasoline, diesel, and heating oil regardless of the price, because it is essential to life in the modern world. America needs a lot of oil just to keep the economy going and to provide for the national defense. It is indispensable to national survival. Rising prices and dubious supplies damage every aspect of the American economy, threaten the political stability of the nation, and make us vulnerable to foreign aggressors.
Paul Johnson in is recent book Heroes recounts how he told Margaret Thatcher that governments really need do only three things: Provide for the nation’s protection from external threats, maintain internal order, and assure a sound currency. Without a sufficient supply of oil at a reasonable price, it can do none of these things for very long. Oil for America, therefore, has become in essence a kind of public utility like highways, airports, electricity and natural gas. But since more than half or America’s oil is imported, the price cannot be “regulated” by government the way, say, gas and electricity are, if only because government cannot control the price. Only the foreign producers do that. Oil is essential for our economy, our national defense, and our political stability, and yet it cannot be priced or traded as a “free market” product.
In a recent poll 92% of the respondents said that dependence on imported oil is a serious or very serious problem. On the question of “global warming,” 66% said it was serious or very serious. So the American people (rightly) see oil imports as a more important issue than global warming. Yet politicians of both parties jump on the bogus global warming bandwagon and assiduously turn blind eyes to our liquid fuel crisis which has the potential to threaten America’s very existence as a free country.
And yet this needn’t be. For although America has a limited supply of oil, it has a virtually unlimited supply of coal that can be converted into petroleum equivalents, and in a few years by just tweaking existing technology it has a virtually unlimited supply of oil shale and biomass that can be converted into energy. Today, the only thing lacking in America to do all of these things is a public awareness of the depths of the problem and the very real solutions available domestically, without imports, and the will on the part of our national and state officials to achieve these goals.
Only once in this too-long political season that has dragged on now for over a year has one single politician referred to the obvious fairly short-term solution to America’s disastrous importation of foreign oil, and that was only after he withdrew from the presidential race. Mitt Romney, in his farewell address, mentioned in passing that America could replace oil imports by liquefying part of our abundant reserves of coal. None of the pundits commenting on Romney’s capitulation remarks noted this statement, though, nor was it reported the next day in the press. The very near term reality of coal liquefaction is met by our political and media elites with a thunderous silence.
America right now can convert coal into petroleum equivalents using first the SASOL process to convert coal into gas (“syngas”), and then using the Fischer-Tropsch technology convert the gas into liquid oil. This is not something new, though over the years it has been perfected to produce environmentally sound products at costs way below the present price of oil. Germany used SASOL and Fischer-Tropsch technology during World War II to sustain its military machine. South Africa has used the two processes for years to produce 30% of its liquid energy needs. It is clean and the product is far less expensive than the per barrel cost of oil imported into America today.
On August 28, 2005, the Southern States Energy Board, comprising sixteen states and two territories (the Virgin Islands and Puerto Rico) unanimously approved the American Energy Security Study (AES), which was a very detailed and nearly exhaustive examination of the problems of petroleum imports and a detailed proposal for solving them. It is America’s first comprehensive plan to eliminate foreign dependence on foreign oil within twenty years. The AES calls for reducing oil imports each year by using coal, biomass, and oil shale, all plentiful and readily available within our borders. It also calls for greater efficiency in our autos and trucks through technology and especially through an increased use of diesel. The AES states emphatically that this can be done if the national will is strong enough. Unfortunately, it is not, and the political will among our political classes and the media seems to be totally lacking.
Well, not totally. In the U.S. Senate S.3325, the “Coal to Liquid Fuel Promotion Act of 2006” was introduced. In the House of Representatives H.R. 5635, “Investment in American Energy Independence Act of 2006” was likewise introduced. Both died in committee, as have all subsequent efforts to pursue the only real alternative we have to imported oil.
The SAE noted correctly that America faces a liquid transportation crisis. Calling it anything less would be dangerously inaccurate. For our modern state to be totally reliant on the Middle East and Venezuela for its economic life-blood is mortally dangerous to our survival as a free society. Yet America’s opinion and policy makers remain almost criminally silent.
The SAE avers that technologies are available right now to harness coal, biomass, and oil shale. It asserts that the private capital is available “in unprecedented quantities” for good projects to achieve these goals.
Embarking on a “national mission” to achieve energy independence from abroad can create an economic and social renaissance in America. It will reduce our risks of shortfalls in supply; it will lower oil prices and price volatility; it will create an industrial boom in America; it will create millions of new jobs; it will foster new technologies; it will enhance American economic growth; it will gradually eliminate our trade and budget deficits; it will insure strategic fuels for our military; and it will establish a reliable energy base on which to rebuild American industries to be able to meet global competition.
So why are our chattering political elites silent on so important an issue as our slavish dependence on Mid Eastern potentates and Hugo Chavez for our industrial life’s blood?
In 2005 America imported 60% of its oil worth 250 billion. Since then, the price of oil has risen sharply and will almost certainly continue to go up as India, China and others increase their demand for what is becoming an inelastic supply. As the price continues to rise, jobs will be lost in America, investment capital will be drained, and larger defense budgets will be required to “protect” the dubious sources we use for the imports and the supply lines to get there here.
Oil is not an unlimited resource. Bringing in new production gets increasingly costly, assuming that new sources can be found. Some experts believe world oil production will peak in around 2020 as oil prices continue to soar. Then, they will soar even more.
No sane society could deny that alternative liquid transportation fuels must be found. Ethanol can fill only a small part of the shortage, and its increased production is affecting the world in terrible ways our politicians, eco-freaks, and the American farm lobby did not predict. The American military uses 300-400,000 barrels a day for jet fuel and diesel. As starters, we should be converting enough coal into liquid fuel right now to assure that supply for our national survival.
The AES study in 2005 called for eliminating 5% of America’s oil imports each year for twenty years, starting in 2007. Sadly, tht deadline has passed and very little or no progress has been made, with the exception of an ethanol production program more of a sop to Midwestern farmers than a viable solution to our energy problems. It’s like the few miles of fence being built on our borders to halt illegal immigration, no more than a band-aid and a token to try to pacify an angry public.
The AES study notes that America has 500 billion tons of coal, an equivalent of 750,000 billion barrels of oil. It also has one trillion barrels of shale oil in the ground, and the potential to sustain to perpetuity the production of 4.5 million barrels of oil a day by converting 1.3 billion tons of biomass. Moreover, by injecting the Carbon dioxide produced in the SASOL process into America’s conventional reservoirs of oil, it is estimated that more than 80 billion “stranded” barrels of oil can be recovered.
In 2005, when petroleum prices were a fraction of what they are today, the authors of the AES study wrote, “Proven technologies are commercially available today to produce mass quantities of ultra-clean alternative fuels from coal and biomass competitively at a profit in today’s market place. Highly promising oil shale and biomass-to-fuel technologies are rapidly emerging.” That was two and a half years ago, and still the first SASOL plant has yet to be built in America.
It is clear, then, that America’s petroleum “crisis” is a home-grown problem, easily fixed in a fairly short time given the understanding by the American people and the support of policy makers at the national and state levels. James Burnham wrote a book critical of Socialism entitled the Suicide of the West; unless we soon act to remove our dependency on enemies and potential enemies, we will see the Energy Suicide of America.
According to the AES study the “viability threshold” price for Coal-to-liquid (CTL) plants ranges from $36-$55 per crude equivalent barrel of oil depending on plant size, coal rank, and configuration of the plant, or $45.50 - $71.50 per barrel of finished diesel fuel. With petroleum over $100 a barrel, the fuel from coal comes in at 70% cheaper than the imported product. Moreover, as America increases its production of synthetic fuel the world price of oil should stabilize and then begin to fall. Were the price to fall below the production cost of synthetic fuel (Saudi crude costs very little to produce), then the Government could support the domestic price by limiting imports of lower cost crude, or blending the two for a lower price to synfuel producers and consumers alike. In the unlikely event foreign oil fell well below the domestically-produced product, prices of foreign and domestic product could be equalized by taxing the cheap import and using the import duties for American roads and bridges.
But more important than these pricing considerations, as America approaches petroleum self-sufficiency its national security will be critically enhanced.
When so-called “Environmentalists” who balk at any use of coal complain there are several obvious answers: First, existing mining laws and their standards are very tough already. Second, according to the AES study, the processes for converting coal to gas and then to liquid are already proven to be ultra-clean, and the carbon dioxide byproduct can effectively be used to recover huge quantities of oil from otherwise already depleted fields. And third, while the so-called “environmental” concerns may be important to faux- fastidious critics of coal, their criticisms are easily trumped by the national security and the survival imperatives of energy self-sufficiency in America.
The SAE study presents a comprehensive list of requirements America needs to put in place to pursue this vital energy self-sufficiency program. It can be found on the Internet at www.americanenergysecurity.org. Suffice it to note here that they call on the Federal and State governments to develop programs to lower the risk profile of alternative fuel projects. By mitigating the risks, project sponsors with large pools of capital will rush to build alternative fuel plants in all fifty states, the economy around the country will be strengthened, millions of jobs will be created, fuel prices will begin to be stabilized (and, hopefully, then decline), and most important, our dependence on foreign oil will rapidly decline and then disappear all together. Tax and fiscal incentives are also recommended as part of this national energy undertaking.
Given the will, America has the natural resources, the strength and the brains to become liquid fuel self-sufficient. We showed the necessary extraordinary ability to overcome challenges in preparing for and fighting World War II, and again with the Apollo space program. We need the same kinds of motivations now in order to get out from under the yoke of hostile or quasi-hostile oil exporting nations. Yet the silence from our media and our political classes is truly deafening. When will the political classes wake up?
It is past time for the American people to understand that a barrel of oil is not a television set, a DVD player, or a pair of running shoes. These latter are consumer goods sold in competitive markets; they are free market products, and I am very much a Free Marketeer. In free markets producers make what eager buyers want to buy. Supply is virtually unlimited and the consumption is determined by price, innovation, technological advances, and fashion. But oil is not a free market product. It is priced by an oligopoly comprising the members of OPEC and serviced by the major oil companies who produce, refine trade, and distribute the products of petroleum, and who benefit from higher oil prices. The oligopoly controls supply to keep prices high, and consumers of petroleum products are completely at their mercy.
In recent years two other factors have entered the supply-demand-price equations for oil: The exploding demand for oil by third world countries, led by China and India, and production shortfalls, either contrived or inevitable.
The elasticity of demand for oil is extremely low precisely because it is essential for transportation and heating. People (and nations) must continue to buy gasoline, diesel, and heating oil regardless of the price, because it is essential to life in the modern world. America needs a lot of oil just to keep the economy going and to provide for the national defense. It is indispensable to national survival. Rising prices and dubious supplies damage every aspect of the American economy, threaten the political stability of the nation, and make us vulnerable to foreign aggressors.
Paul Johnson in is recent book Heroes recounts how he told Margaret Thatcher that governments really need do only three things: Provide for the nation’s protection from external threats, maintain internal order, and assure a sound currency. Without a sufficient supply of oil at a reasonable price, it can do none of these things for very long. Oil for America, therefore, has become in essence a kind of public utility like highways, airports, electricity and natural gas. But since more than half or America’s oil is imported, the price cannot be “regulated” by government the way, say, gas and electricity are, if only because government cannot control the price. Only the foreign producers do that. Oil is essential for our economy, our national defense, and our political stability, and yet it cannot be priced or traded as a “free market” product.
In a recent poll 92% of the respondents said that dependence on imported oil is a serious or very serious problem. On the question of “global warming,” 66% said it was serious or very serious. So the American people (rightly) see oil imports as a more important issue than global warming. Yet politicians of both parties jump on the bogus global warming bandwagon and assiduously turn blind eyes to our liquid fuel crisis which has the potential to threaten America’s very existence as a free country.
And yet this needn’t be. For although America has a limited supply of oil, it has a virtually unlimited supply of coal that can be converted into petroleum equivalents, and in a few years by just tweaking existing technology it has a virtually unlimited supply of oil shale and biomass that can be converted into energy. Today, the only thing lacking in America to do all of these things is a public awareness of the depths of the problem and the very real solutions available domestically, without imports, and the will on the part of our national and state officials to achieve these goals.
Only once in this too-long political season that has dragged on now for over a year has one single politician referred to the obvious fairly short-term solution to America’s disastrous importation of foreign oil, and that was only after he withdrew from the presidential race. Mitt Romney, in his farewell address, mentioned in passing that America could replace oil imports by liquefying part of our abundant reserves of coal. None of the pundits commenting on Romney’s capitulation remarks noted this statement, though, nor was it reported the next day in the press. The very near term reality of coal liquefaction is met by our political and media elites with a thunderous silence.
America right now can convert coal into petroleum equivalents using first the SASOL process to convert coal into gas (“syngas”), and then using the Fischer-Tropsch technology convert the gas into liquid oil. This is not something new, though over the years it has been perfected to produce environmentally sound products at costs way below the present price of oil. Germany used SASOL and Fischer-Tropsch technology during World War II to sustain its military machine. South Africa has used the two processes for years to produce 30% of its liquid energy needs. It is clean and the product is far less expensive than the per barrel cost of oil imported into America today.
On August 28, 2005, the Southern States Energy Board, comprising sixteen states and two territories (the Virgin Islands and Puerto Rico) unanimously approved the American Energy Security Study (AES), which was a very detailed and nearly exhaustive examination of the problems of petroleum imports and a detailed proposal for solving them. It is America’s first comprehensive plan to eliminate foreign dependence on foreign oil within twenty years. The AES calls for reducing oil imports each year by using coal, biomass, and oil shale, all plentiful and readily available within our borders. It also calls for greater efficiency in our autos and trucks through technology and especially through an increased use of diesel. The AES states emphatically that this can be done if the national will is strong enough. Unfortunately, it is not, and the political will among our political classes and the media seems to be totally lacking.
Well, not totally. In the U.S. Senate S.3325, the “Coal to Liquid Fuel Promotion Act of 2006” was introduced. In the House of Representatives H.R. 5635, “Investment in American Energy Independence Act of 2006” was likewise introduced. Both died in committee, as have all subsequent efforts to pursue the only real alternative we have to imported oil.
The SAE noted correctly that America faces a liquid transportation crisis. Calling it anything less would be dangerously inaccurate. For our modern state to be totally reliant on the Middle East and Venezuela for its economic life-blood is mortally dangerous to our survival as a free society. Yet America’s opinion and policy makers remain almost criminally silent.
The SAE avers that technologies are available right now to harness coal, biomass, and oil shale. It asserts that the private capital is available “in unprecedented quantities” for good projects to achieve these goals.
Embarking on a “national mission” to achieve energy independence from abroad can create an economic and social renaissance in America. It will reduce our risks of shortfalls in supply; it will lower oil prices and price volatility; it will create an industrial boom in America; it will create millions of new jobs; it will foster new technologies; it will enhance American economic growth; it will gradually eliminate our trade and budget deficits; it will insure strategic fuels for our military; and it will establish a reliable energy base on which to rebuild American industries to be able to meet global competition.
So why are our chattering political elites silent on so important an issue as our slavish dependence on Mid Eastern potentates and Hugo Chavez for our industrial life’s blood?
In 2005 America imported 60% of its oil worth 250 billion. Since then, the price of oil has risen sharply and will almost certainly continue to go up as India, China and others increase their demand for what is becoming an inelastic supply. As the price continues to rise, jobs will be lost in America, investment capital will be drained, and larger defense budgets will be required to “protect” the dubious sources we use for the imports and the supply lines to get there here.
Oil is not an unlimited resource. Bringing in new production gets increasingly costly, assuming that new sources can be found. Some experts believe world oil production will peak in around 2020 as oil prices continue to soar. Then, they will soar even more.
No sane society could deny that alternative liquid transportation fuels must be found. Ethanol can fill only a small part of the shortage, and its increased production is affecting the world in terrible ways our politicians, eco-freaks, and the American farm lobby did not predict. The American military uses 300-400,000 barrels a day for jet fuel and diesel. As starters, we should be converting enough coal into liquid fuel right now to assure that supply for our national survival.
The AES study in 2005 called for eliminating 5% of America’s oil imports each year for twenty years, starting in 2007. Sadly, tht deadline has passed and very little or no progress has been made, with the exception of an ethanol production program more of a sop to Midwestern farmers than a viable solution to our energy problems. It’s like the few miles of fence being built on our borders to halt illegal immigration, no more than a band-aid and a token to try to pacify an angry public.
The AES study notes that America has 500 billion tons of coal, an equivalent of 750,000 billion barrels of oil. It also has one trillion barrels of shale oil in the ground, and the potential to sustain to perpetuity the production of 4.5 million barrels of oil a day by converting 1.3 billion tons of biomass. Moreover, by injecting the Carbon dioxide produced in the SASOL process into America’s conventional reservoirs of oil, it is estimated that more than 80 billion “stranded” barrels of oil can be recovered.
In 2005, when petroleum prices were a fraction of what they are today, the authors of the AES study wrote, “Proven technologies are commercially available today to produce mass quantities of ultra-clean alternative fuels from coal and biomass competitively at a profit in today’s market place. Highly promising oil shale and biomass-to-fuel technologies are rapidly emerging.” That was two and a half years ago, and still the first SASOL plant has yet to be built in America.
It is clear, then, that America’s petroleum “crisis” is a home-grown problem, easily fixed in a fairly short time given the understanding by the American people and the support of policy makers at the national and state levels. James Burnham wrote a book critical of Socialism entitled the Suicide of the West; unless we soon act to remove our dependency on enemies and potential enemies, we will see the Energy Suicide of America.
According to the AES study the “viability threshold” price for Coal-to-liquid (CTL) plants ranges from $36-$55 per crude equivalent barrel of oil depending on plant size, coal rank, and configuration of the plant, or $45.50 - $71.50 per barrel of finished diesel fuel. With petroleum over $100 a barrel, the fuel from coal comes in at 70% cheaper than the imported product. Moreover, as America increases its production of synthetic fuel the world price of oil should stabilize and then begin to fall. Were the price to fall below the production cost of synthetic fuel (Saudi crude costs very little to produce), then the Government could support the domestic price by limiting imports of lower cost crude, or blending the two for a lower price to synfuel producers and consumers alike. In the unlikely event foreign oil fell well below the domestically-produced product, prices of foreign and domestic product could be equalized by taxing the cheap import and using the import duties for American roads and bridges.
But more important than these pricing considerations, as America approaches petroleum self-sufficiency its national security will be critically enhanced.
When so-called “Environmentalists” who balk at any use of coal complain there are several obvious answers: First, existing mining laws and their standards are very tough already. Second, according to the AES study, the processes for converting coal to gas and then to liquid are already proven to be ultra-clean, and the carbon dioxide byproduct can effectively be used to recover huge quantities of oil from otherwise already depleted fields. And third, while the so-called “environmental” concerns may be important to faux- fastidious critics of coal, their criticisms are easily trumped by the national security and the survival imperatives of energy self-sufficiency in America.
The SAE study presents a comprehensive list of requirements America needs to put in place to pursue this vital energy self-sufficiency program. It can be found on the Internet at www.americanenergysecurity.org. Suffice it to note here that they call on the Federal and State governments to develop programs to lower the risk profile of alternative fuel projects. By mitigating the risks, project sponsors with large pools of capital will rush to build alternative fuel plants in all fifty states, the economy around the country will be strengthened, millions of jobs will be created, fuel prices will begin to be stabilized (and, hopefully, then decline), and most important, our dependence on foreign oil will rapidly decline and then disappear all together. Tax and fiscal incentives are also recommended as part of this national energy undertaking.
Given the will, America has the natural resources, the strength and the brains to become liquid fuel self-sufficient. We showed the necessary extraordinary ability to overcome challenges in preparing for and fighting World War II, and again with the Apollo space program. We need the same kinds of motivations now in order to get out from under the yoke of hostile or quasi-hostile oil exporting nations. Yet the silence from our media and our political classes is truly deafening. When will the political classes wake up?