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Coal to liquids

The folks down under are seriously talking about converting coal into diesel and gasoline on a massive scale.  It’s a conversation America should be having.  Check it out.  Advocates claim coal-to-liquid (CTL) gasoline is economically competitive with deep water oil recovery.  A study published by Rand says the real economic break-even point comes when crude oil is in the neighborhood of $60 per barrel.  However, if crude reached $100 per barrel and stayed there, private investors would kick start a big CTL effort and no government involvement would be needed.

“If investors would be confident that average longterm crude prices would remain consistently above $100 per barrel, no government policy would be required to support the emergence of a successful commercial CTL industry.” (Rand study linked above.)


Environmental impact?  Hard to judge, and it depends on the mining techniques used.  Obviously if they’re scraping off the mountaintops in West Virginia and piling the mine waste in nearby rivers, that’s bad.  Americans don’t want that sort of mining operation any more, and they’re willing to pay a few bucks a ton to make things cleaner.  Environmental radicals insist that all the carbon dioxide be captured and stored underground.  This is considered necessary only on the theory that CO2 is causing global warming which even the British Royal Society has now begun to question.  CTL refining consumes a lot of water — about as much water by volume as the fuel that’s produced.

It’s encouraging to realize that the Malthusian doomsayers of peak oil haven’t counted on this.  It’s true that cheap oil from Arabian sand has peaked and will run dry someday.  But as oil reserves dwindle and prices rise, gasoline made from coal will become economical even with no government sponsorship at all.  The trick for investors will be to predict when the break-even point will come and have their conversion facilities ready to go at that time.  The person who does that — and somebody certainly will — stands to become the most beneficial economic influence in modern times because America has way more coal than Saudi Arabia has oil.

It’s also true that eventually, even America’s gargantuan coal reserves could be used up.  Resources like coal are obviously not infinite.  What’s needed is not an eternal supply of stuff to burn, but a source of fuel that can be used until people figure out how to do without it in a cost-effective way.  Maybe someday everybody in the world will drive electric cars that run 500 miles on a battery that can be fully recharged in five minutes.  And maybe the electricity will come from whiz-bang solar panels or thorium-powered nuclear plants.  But until then, we need a reasonably priced source of energy that can do what gasoline and diesel do.  Maybe converting coal to liquid fuel could be that bridge to the future.

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