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.