No Runny Eggs

The repository of one hard-boiled egg from the south suburbs of Milwaukee, Wisconsin (and the occassional guest-blogger). The ramblings within may or may not offend, shock and awe you, but they are what I (or my guest-bloggers) think.

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It’s Time for a Game Changer

by @ 5:00 on May 23, 2008. Filed under Energy.

What if I told you:

  • I could guarantee oil at no more than $75/barrel
  • We would have a 100 year supply at current usage levels
  • Gas would cost about $2.50
  • We could eliminate at least 25% of our foreign oil import
  • At $75/barrel, we could eliminate sending $67B dollars a year to foreign governments
  • The most it would cost US taxpayers is an amount equal to what we just paid for the phony stimulus checks.

Would you be interested?

In 2006 when oil was running about $75/barrel, the CEO of Jet Blue, David Neeleman put together a plan  to develop an industry that converted coal to oil.   The technology for this process was developed in WWII and was used by the Germans to manufacture oil as they were being shut out from other sources.   Following WWII  the abundant availability of cheap oil, along with lobbying from oil companies and environmentalists  caused various US trials and efforts towards commercializing coal gasification technology to be forgotten.

So why can’t we get coal gasification going now?   First, as you may have already guessed, environmentalists go crazy any time coal is mentioned.   The gasification process does release carbon dioxide (oooooooh, the boogieman of global warming!).   However, recent advances in cleaning processes have advocates claiming that they can actually make the process less carbon impactful than today’s burning of natural oil.   Additionally, carbon dioxide is used by traditional oil companies to claim oil otherwise unattainable.   The carbon dioxide is pumped deep into wells which causes oil to move towards the surface.   Once in the ground, the carbon dioxide naturally is reabsorbed into the ground.

The second reason coal gasification hasn’t moved forward is that it is economics.   Neeleman’s plan had an estimated cost of $4B per plant that was capable of producing 20M barrels of oil each year.   The estimated break even point is about $55/barrel.   One can imagine the difficulty of gathering capital to produce a commodity that has the significant fluctuations of oil.   Even in 2006, there were well known analysts saying that oil would settle back to $30 or $40 per barrel.   Neeleman’s proposal would be that the US government would guarantee the capital investment.   Ironically, in exchange for the guarantee, Neeleman’s plan offered a windfall profit to the government of 25% of any amount that oil went over $75/barrel.

Neeleman’s plan called for 45 plants for a total guarantee of $180B (this would be a guarantee not a handout).   With 45 plants they could replace about 25% of our current imports.

As with other solutions, coal gasification isn’t going to solve our energy problem overnight.   However, also like other solutions, if we don’t start, we’ll never get there.

It’s time for Congress to quit telling us what won’t work  or spending time on asinine pandering like voting to sue OPEC or degrading oil executives.  

If Congress took our energy problem seriously they would  recognize that for the forseeable future there are no alternatives to petroleum for transportation.   It’s time to take the Ben Bernanke approach, throw out “business as usual” and develop new tools that address the very specific issue of expanding supply.   Anything else is just wasting time.   Unfortunately, that’s one of the few things that Congress seems competent in doing.

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