Guest Post: A Plan for Synthetic Fuel Stimulus

Tyler Durden's picture

Submitted by Brad Shaffer

A Plan for Synthetic Fuel Stimulus

It is time for the United States to embark on a serious effort to develop a synthetic fuels program.  In 1979, Americans imported 30% of our oil. Now that figure is 60% and growing. This raises a national security crisis that we have blissfully ignored, as the price of crude continues to inflate and our enemies grow stronger, financed by our own petrodollars.

There has never been an example of a nation so powerful being willing to place its economic life in the hands of so many hostile powers, while denying itself the natural resources within its own borders.  To wit: The U.S. has more energy in coal than all of Saudi Arabia has in oil. We float on a lake of natural gas and swim in a sea of agriculture: grain, corn, switchgrass — the three main substances from which we can create all the synthetic fuels our country needs.

Why synthetic fuels? Synfuels will reduce our dependency on foreign energy and thus stabilize national security. This helps keeps petrodollars in the U.S. as well.  Furthermore, investing in synthetic fuels would make us a leader in a new energy industry. Synthetic fuels could create well-paying manufacturing jobs here in the U.S., where we have already surrendered our manufacturing base in favor of a service economy with dubious consequences.

While synthetic fuels may or may not be green, depending on the raw materials used, (coal is less green, biomass more so) it is a tried and proven technology which can be implemented immediately.  For example, the Fischer-Trope process for hydrocarbonation dates back to the 1920s.  In fact, airlines and the U.S. Air Force are already converting some of their fleets to synthetic jet fuels — a recent development.  Furthermore, existing gas and oil pipelines can provide us with the infrastructure needed and the U.S. has all of the coal, oil shale, natural gas and bio-products we could possibly need for supplies.

One way to make the transition to synfuels would be through the establishment of a federal authority having short-term control over energy independence policy.  Synthetic fuels can be worked on by a hybrid quasi-government sponsored agency such as we are seeing with auto companies.

But why the federal role? A massive “Manhattan Project” to push for synthetic fuels would be needed because the capitalist machine is dysfunctional at the moment. Simply put, I do not trust Wall Street (the traditional source of investment capital) to act in the national interest. Rather, they will seek another avenue to reap a fast buck. Today’s venture capitalists and bankers view green tech as the next “new new thing,” and as such their sights are set on realizing quick gains instead of altering the national security infrastructure when the latter is what our dependence on foreign oil comes down to.

But shifting the focus away from green tech and toward the development of synthetic fuels will not happen overnight.  First, the U.S. government must invest in reinstating the synthetic fuels program scrapped in the 1980s, when the oil glut caused the price of crude to plummet.  The U.S. should also commit investment capital in existing synthetic fuel firms in exchange for stock, which the government could then offer out to the public at the appropriate time, once the firms are up and running. The government could then take the profits and plow them into R&D for more radical, cleaner and still-developing green tech, to prepare to meet the energy and environmental needs of the 22nd century.

Being conservative does not make one a libertarian.  Treating our current foreign/domestic energy deficit as a national security matter would place a synfuels program well within the auspices of the Department of Defense (DoD) and thus within what conservatives should view as a proper exercise in federal power.  The government should scale down the Department of Energy, which is bloated and inefficient, and move the synfuel development infrastructure to the DoD, which is already an active leader in the technology.

Furthermore, the Defense Advanced Research Projects Agency (DARPA), an agency of the DoD  has estimated that the cost of a 100,000 barrel per day 21st century coal-to-liquids synthetic fuels plant would be about $6 billion.  Other private sector estimates place the figure higher at $10 billion.  Even that higher figure is equivalent to the cost of one and a half months of the Iraq war.  For the price of the Wall Street bailout—$700 Billion—the DoD could build between 70 and 100 new CTL plants, which would produce up to  ten million barrels of synthetic CTL fuel per day.

In addition, Washington must adjust current tax policies to be domestic synfuels-friendly by gradually ramping up import tariffs on oil as more synfuels plants come on line, and by creating tax-free energy enterprise zones (as Canada did starting in 1961 with their now-successful and profitable shale oil program in the Western provinces) to encourage small companies to enter this area.

The transition to synthetic fuels also provides a great platform for the more business and defense-friendly GOP to run on.  And by acknowledging that green tech is, in fact, vital by committing synthfuel profits to green R&D, realistic eco-friendly groups might grudgingly go along.

In short, America’s energy consumption habits are hard-wired and it is unrealistic to think that they will meaningfully change in the short or medium-term. It’s synthetic fuel, not green tech, that has the potential to bridge this gap (to materially lower consumption) while effecting real economic, social and political change. We are in dire need of business and political leaders who can carry the message and drive change.

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MountainHawk's picture

I have some stock in SYNM, their technology converts chicken fat to produce bio diesel.

LowProfile's picture

Synfuel and Butanol, bitchez!

Bananamerican's picture

Let's see....First Tyler pens a pean to H1-B's, then states his preference on the inevitability of Amerikan labor surrendering to their rendering in the great global meatgrinder of slave wage arbitrage.

Now we read that Amerika ..


has been "voluntarily" placing .."its economic life in the hands of so many hostile powers, while denying itself the vast mystic oceans of oil within its own borders" ...when we should really be getting jiggy with COAL (suggest blog name change to "Zero-visability" in that event) ...That we "float on a lake of natural gas (Infrastructure!) and swim in a sea of agriculture: grain, corn, switchgrass" (W was always so proud to roll that one off his simian tongue)— Dig it Tyler....that Ethanol scam was some DOPE ASS SHIT! Tyler, you are rapidly inhabiting my "Nutjob" file just as Denninger did before you.... How much of the rest of the shit on this blog is pulled out of your ass?


mtomato2's picture

Wow.  What sophistikated arguments you make.

michael.suede's picture

It is time for the American government to stop using coercive violence against its own people, forcing them to buy crap they don't want and don't need.

For example, currently the American government violently loots the public to the tune of billions of dollars, then takes that money and hands it to corn farmers.

The corn farmers grow epic amounts of corn, which we are then forced to burn in our gas tanks.

Basically, the American government forces its people to burn money for fuel.

The criminal American government simply needs to get the hell out of the way and allow the market to produce the correct fuel for our vehicles and factories.  The "correct" fuel is the one which does not have to be rammed down the public's throat at gun point.


panika2008's picture

Would be cool if the american government's "getting the hell out of the way" actually increased the world's stock (or flow, for that matter) of usable energy. Unfortunately, no such luck.

SWCroaker's picture

Respectfully, how do you know this?  The airwaves are presently full of mouthpieces who tell us about the failure of capitalism and free markets, all the while holding up the poor performance of our current near-socialist definitely *not* free markets as examples of failure.  You presume a result from a circumstance that hasn't actually existed.


As for factual examples, our government in the past pushed strongly for ethanol, an absolute disaster and epic fail from an engineering/scientific analysis.    Beautiful example of the government "getting in the way", and why many believe that ex-lawyers and car salesman shouldn't be making decisions about national energy policy, at all.  When the private sector pushes for something that isn't profitable or competitive, it comes to a screeching halt due to lack of continued funding.  When the public sector pushes for something that isn't profitable, there is no such check, and the idiocy can reach tremendous proportions buoyed on the back of unwilling taxpayers.  This is better how?

panika2008's picture

Changing the method of slicing a pie does not make the pie any larger or more tasty.

Nothing wrong with capitalism if you ask me. It's just that Earth is finite.

Fred Hayek's picture

Did other posters argue that it's not or do you believe that there's somehow inherent in capitalism a set in stone belief that the earth is not finite?  It seems like arguing a straw man point. 

RichardP's picture

I think all understand the earth is finite.  It's just that some argue for using it all up now; others argue we should save some for later.

masterinchancery's picture

Much more logical is to develop the enormous quantities of energy that we already have, especially coal, shale oil, tar sands, offshore oil, etc. which have been ruled out by the EPA dictatorship.

Seer's picture

It's MINIG, not "development!"

What you are advocating is the srtategy of strength through exhaustion.

People have to quit using the bening term "production" on a non-benign process/situation.  "Production" is a process, not a resource.  Exhaust a resource and there is NO production- capiche?

Rusty Shorts's picture

Yeah, I always get a kick when oil companies talk about production, "Oh, we produced 400 gadzillion barrels this quarter". Oil companies do not produce dick, the Earth produced the oil. Oil companies poke a hole in the Earth, siphon oil out, and destroy it.

RichardP's picture

Can a magician produce a rabbit out of a hat?  Can a thief produce the stolen goods?  Can an oil company produce oil from the ground?  The dictionary says all of these productions can happen.

grandcanonical's picture

On the other hand as long as we own/control Iraq, House of Saud, et al isn't the Middle East actually a domestic supplier?

Sqworl's picture

Collateral cost is too high!!!...

Stevm30's picture

Here's a better plan.  Stop wasting our treasure and lives to artificially stabilize the middle east.  Next time the Arabs and Israel go to war, and oil spikes to $350/barrel - watch all those "green energy" companies get money from PRIVATE interests.  Problem solved.

panika2008's picture

What kind of media brainfuck does it take to induce in american hatred for the hand that feeds them almost for free? Are you guys suicidal or what? Really think it would be cool to just forego the cheap oil provided under the US Army's aegis? I say madness! Suicidal, masochistic madness!

SWCroaker's picture

It doesn't take media blather, just morals.  And an expectation that human existence should contain a hint more responsibility and a lot less "gimmee"... 


PS.  Your "hand that feeds you" for "almost free" is stealing from you, right now, this very instant.  Can you feel it?  Are you even aware of it?  The value of your savings, your degree of personal freedom, your very self-image as a responsible human in a just world are being eroded, bit by bit.  A country that takes from its citizens, seizes from others by force of military might, and lies routinely sets a tone for entire generations to be raised thinking a dishonorable existence is natural and the way to go.  Please give totalitarianism a 2nd evaluation before embracing it so...

panika2008's picture

Every day I fill my tank at the station I feel that I'm getting something half free. Does it make me an accomplice? Probably. Fuck morals. Might makes right. And the cost of this might is so tiny for you Americans, and still you complain. How the fuck is this reasonable? Getting a heap of free goods for like a 2 or 4% GDP spent on DoD and friends. You guys seriously need to go back to school and learn to calculate what's good for you and your families.

As we are at families. Please tell me, do morals feed your relatives? Did morals feed the people of Carthage when their country was smashed by the Roman empire and themselves killed and enslaved?

blunderdog's picture

You're not really calculating the costs accurately.

If I go steal a 40oz bottle of beer from the local deli, it's "free," right?  But if I have to buy a gun to get it, or end up on Riker's because I get caught, the cost increases dramatically.

May as well burn down your house and watch all that big free insurance money roll in.

The most glaring (offensively so, really) omission is that the DoD budget doesn't fund the cost of the wars.  Military operations are funded with supplemental spending--very rarely on-budget.  The ongoing health-maintenance costs of all the war casualties get driven out of the costs paid by income taxes, and shifted to SSA and Medicare.

There's nothing "free" about any of it.  It's just a government-enforced system to increase wealth-inequality among the domestic population.  A few guys who were worth $40million get to be worth $50million, and a million other guys worth shit are now worth less-than-shit.  A few are dead.


panika2008's picture

So, what is the real cost of these wars? lists it as ca 1 trillion $ from 2001 on, I'm inclined to think that the site does not underrepresent it. 1 trillion per 9 years, OMG that's a lot, especially taking into account that your Capitol dupes spent lighheartedly like 2 trillions in 2 years saving the banks.

LowProfile's picture

You neglected to subtract out the 60 years of treasure spent on the guns to get you your "half free gas", which includes debasing the money to fund the war machine.

And that doesn't even figure in all the blood spilled.

From where I sit, your so called "half free gas" is pretty fuckin' expensive, bub.

panika2008's picture

That is quite possible, but please not that many other countries debased their currency much, much more and spent - or at least tried to - much more per capita on arms, well, and the winner is USA.

Please note that the domestic production of oil in US peaked in 1970s. Domestic production of oil in the USSR peaked in 1980s. US, contrary to USSR, was able, in spite of surging oil price, to stabilize its empire and by its brutal presence around the world ensure the flow of black gold. USSR failed it. Pray tell who did better.

l1xx3r's picture

You have some serious re-evaluating to do.

Sam Clemons's picture

You believe in the free market?


Anyways, seems like a good trade no matter what the cost of a barrel.  Trade fiat for oil.  What a deal.

panika2008's picture

A good trade, and one that is largely possible thanks to the guys at the Pentagon.

Sqworl's picture

This has to be the work of Brad Schaeffer?? 

Lapri's picture

Who's Brad Schaffer? Maybe he owns some energy hedge fund or something and looking for a federally guaranteed profit, like Bill Gross does all the time by front-running the Fed?

If he so believes in the synthetic fuel, he should feel free to do it himself. Don't drag us into it by forcing us to subsidize.

Sudden Debt's picture

It's not about the oil. It's all about bribes.


kaiserhoff's picture

Why synfuels?  So the government can waste another trillion dollars and put more guns to our heads.  This has already been solved.  With new drilling technology we have over a hundred years supply of natural gas.  Convert fleet vehicles to natgas and piss on oil.

Cost - 40 % or less than gas or diesel

Great cold weather starts

No refining cost or pollution

Greatly reduced transport costs and related spills

Engines last forever because it burns clean

drB's picture

Being a chemist I think all this is CRAP and will result in disaster just like "bioethanol" which is neither green nor cheap. The only economically viable form of energy other than coal, gas, and oil is nuclear energy. For some reason it is not being developed enough, and if we would switch from fossil fuels to nuclear for electricity generation then Middle East can go and eat sand. My recollection is that 10% of oil consumed in US is used for residential heating/electricity production, and if that is cut out + convert some transportation to natural gas which is here in relatively large amounts then oil price/consumption will drop to the level that oil-producing nations will not be able to be stupid any more.

LMAO's picture


Thorium anyone?

drB's picture

Exactly! But even current technologies for nuclear plants would be sufficient for many years. AND they are not pumping CO2 into atmosphere. I wonder why INconvenient truths did not advertise nuclear finantial gain there :)

Seer's picture

Reading stuff like this just makes me feel better about not being one of the drones produced by "higher" education.

If one is myopic then the most hideous solution could be made to appear rational.

Assuming that nuclear plants could be constructed in time to save us from the impending energy drop, which they cannot (perhaps for the advantage of the wealthy), one must realize they are no more than a PROCESS, they do not CREATE anything, they TRANSFORM.  And what is it that they TRANSFORM? raw materials, LIMITED raw materials; as a matter of fact, raw materials that are SCARCER than any other materials from which we derive energy from.

How about we first determine whether all these energy-dependent systems/way of life is really needed before trying to perpetuate them?  That people can't see it for what it is -a centrally planned govt- just allows us to continue to be manipulated right up to the massive grow-or-die collapse that is on the horizon; and all that's being done it to adjust the SPEED at which we're heading there, NOT the direction!

Inconvenient Truth promoted nuclear through omission.  It did NOT bash nuclear: geezus, Gore is from a big nuke state! (fucking people are SOOO duped!)  Some of the biggest pro-nuke ads in years came out exactly when this film came out- conincidence?  I don't think so.  The elitists (many with "Dr." in front of their names) are all in it to perpetuate a system that CANNOT be perpetuated; they do so so that they can continue to make OTHER people do work, while they tell everyone else what to do!

"But even current technologies for nuclear plants would be sufficient for many years"

Without any metric applied you're just promoting blind faith here.

Just imagine BP running nuke plants.  It'll happen; and if not BP then someone else.

I tend to think that heroin junkies can kick heroin easier than energy junkies can kick energy.

Bottom line: entropy is going to kick everyone's ass.  Big systems WILL fail, and one day they will be no more.  What will you want to have at that point?  A wasteland?

drB's picture

Nothing is eternal. Even if you do not consume anything Sun will turn into red giant and swallow Earth. The question is, how to make our existence here reasonable for time being. If you are against any consumption why don't you leave for Pakistan of Zimbabwe..they do not consume much energy. And who will decide what is reasonable consumption and what is not? You? Government? People who make decisions are the ones who have their palms greased.

With respect to how long can we use energy. Fast breeders which use 238U would produce energy sufficient for billions years by current needs (if they would be built; American Journal of Physics, 51, (1), 1983). Sun will turn into red giant much earlier. I give you that any consumption is destructive, and as such it would be good if it is minimal, but that is unrealistic.

Fred Hayek's picture

If you'd go look at any site about the use of thorium in liquid fluoride thorium reactors you'd find that the U.S. has, literally, thousands of years by best estimates of the stuff.  And it's actually harmless in its natural state.  You can hold a lump of it in your hand without injury. 

Please look into the issue.  For a start, you might try reading this:

and this:

and this:


LowProfile's picture


Hell yes, THORIUM!

You refine the thorium from coal deposits.

Then use that thorium to create electricity, some of which you use to convert coal into liquid motor fuel.

1000 years of energy indpendence.  At least.


Spread the word.



panika2008's picture

"Then use that thorium to create electricity", uh, it's not that simple really.

Mercury's picture

Let's at least convert what we can to nat gas first which we apparently have a shitload of suddenly.  That would be an improvement in several areas at once plus we know it works and what the trade-offs are already.  When we've made that move (and nuclear too) then we can afford to tilt at windmills and cow farts and other wacky (sorry, alternative) things like that but lets pick the low hanging fruit first please.

Seer's picture

You've got a pile of dirt in your back yard.  It's a BIG pile.  If you advocate using that dirt, meaning that it's going to be REMOVED from that BIG pile, do you really think that your BIG pile is going to STAY big?

Stating that there's a "shitload" of NG is meaningless.  Without stating what kind of drawdown that can be expected -remember: you are, but default, encouraging a more rapid rate of drawdown- you have NO idea how long that resourse is gonig to last!

That stated, I DO agree that it would be more meaningful to use NG directly than indirectly, such as Canada is doing to produce oil from its tar sands.  And speaking of Canada, the US gets something like 16% (reference: of it NG from there.  Since the US is importing That much, does anyone honestly believe that increasing the demand will reduce imports here?

This energy shit is the yoke around people's neck.  It's how TPTB control you!  Yes, msater, just give me another fix!

Landrew's picture

Bravo! Well said! I will tell you this, uranium is also a finite fuel of which we have only ten yrs. supply at increased consumption. Working in high energy I always laugh when I hear friends say, don't worry you guys will take care of the technology to save us ha! People just don't get it, there is nothing like high btu crude oil and we wasted it. When you have to mine, drill a mile deep in water, inject water/nitrogen you are at the end of the cheap oil done over said. We don't have to worry about alternatives becoming available, nuclear, pollution etc., the countries with the last of the crude will withhold and horde the last 30% and tell us if you want to build anything come to us.  You can not feed 7 billion people with anything less then cheap crude. Remember the last 30% is worth far far more than the previous 70%!

dussasr's picture

"I do not trust Wall Street (the traditional source of investment capital) to act in the national interest." 

This is good because Wall Street acts in their own interest.  I think it is a mistake to assume that they should act in the national interest - they are business people whose priority is to earn a living.

I agree with you that it is a national security risk to import as much energy as we do.  However, part of me doesn't mind using up other country's resources while our domestic supplies remain underdeveloped.  This helps to ensure that we will have domestic energy in the future.  

Finally, I also think it is a mistake to assume that we need more feds on the public nipple to solve this issue.  After all, the reason the Department of Energy was created was to reduce dependence on foreign oil.  How has that worked out? 

The best way to encourage development of alternative engery supplies is to tax the ones you are trying to reduce consumption on.  However, this raises the overall cost of energy for Americans and sends jobs overseas where energy would be cheaper.  You would have to be extremely careful with such a move to avoid doing something counterproductive.

Seer's picture

"I agree with you that it is a national security risk to import as much energy as we do."

Whose "national security?"  With all this increase in said "national security," do YOU feel safer?  I sure the fuck don't!  "National security" is a fucking racket by TPTB to control the masses.

"However, part of me doesn't mind using up other country's resources while our domestic supplies remain underdeveloped.  This helps to ensure that we will have domestic energy in the future."

Which part of you believes this way?  Would you be willing to go to where your oil is coming from and inform the people There how you feel?  Probably not.  You are, in essence, just participating in the pillage of other people.

Your approach, however, is nothing new.  One of the Forbes stated this very strategy back in the early 70s: of course, if any of the oil exporting countries were to take this same approach our "national security" apparatchik would demonize them.

As far as having any assurance of having energy in the future... fantasy land!  Build up an even BIGGER energy consuming country and then have it feed only on its own resoruces will only result in an extremely fast drawdown/depletion, and Then what?

LostWages's picture

Why not listen to Boone Pickens?  His plan to convert all the big trucks to CNG would create jobs (converting all the big rigs, adding CNG fueling depots along major interstates), and would reduce our imports greatly.

The falling price of oil would create a tax reduction in the form of cheaper gas prices and boost the economy by putting more money in the hands of Ipod buyers.

A Fast Money guest the other day (sorry I don't remember his name, a big hedge fund guy) also suggested giving citizenship to foreign immigrants who pay cash for a house and live in it for at least two years.  This would cause housing prices to recover and force the would be homebuyers off the sidelines.  As deflation in the housing market continues, the urgency to buy today has been removed as prices will be cheaper tomorrow. 

Never mind, it makes too much sense and the politicians would have to get their hands out of the pockets of big oil. 

Seer's picture

Yeah, right on!   Let's just keep the Ponzi going so that it can get around to dying!

And when the "conversion" is over, then what do all those mechanics do?

And, why the fuck do we have to be moving big trucks around?

BIG = FAIL! (be it big government, big busienss, ANY BIG system [except nature])