Fischer-Tropsch News Item

I stumbled across this old news item on NASA research:

http://www.sciencedaily.com/releases...0131095501.htm

While converting coal into gasoline is not particularly exciting in
these days of global warming, at least this helps to refute the claim
that a conspiracy is keeping this from us. Instead, the problem is
simple enough; the plants are expensive to build, and it is easy for
the price of the fuel they produce to be undercut by traditional oil
suppliers.

Building such a plant at the height of the oil crisis would have been
a public service - so the government should have done it instead of
expecting private enterprise to pay for it.

John Savard

Quadibloc wrote:

:I stumbled across this old news item on NASA research:
:
:http://www.sciencedaily.com/releases...0131095501.htm
:
:While converting coal into gasoline is not particularly exciting in
:these days of global warming, at least this helps to refute the claim
:that a conspiracy is keeping this from us. Instead, the problem is
:simple enough; the plants are expensive to build, and it is easy for
:the price of the fuel they produce to be undercut by traditional oil
:suppliers.
:
:Building such a plant at the height of the oil crisis would have been
:a public service - so the government should have done it instead of
:expecting private enterprise to pay for it.
:

Why do you think the government should build such a thing when it
isn't, by your own demonstration, currently economically viable?


--
"The reasonable man adapts himself to the world; the unreasonable
man persists in trying to adapt the world to himself. Therefore,
all progress depends on the unreasonable man."
--George Bernard Shaw

On Feb 1, 3:31*pm, Fred J. McCall wrote:

Why do you think the government should build such a thing when it
isn't, by your own demonstration, currently economically viable?

It isn't economically viable *for private enterprise*.

If I spend two billion dollars, and build a plant that can produce
gasoline for cars at a price equivalent to $8.00 per barrel of crude
oil... then, the Arabs can start selling crude oil for $7.80 a barrel
the next day, and I don't make a cent.

On the other hand, lowering the price of crude oil to $8.00 a barrel
would benefit the American people in general, and thus two billion
dollars would be a very modest investment, with a great return, on the
part of the U.S. government. Because, basically, it can recover its
costs by collecting a *tax* on gasoline, or blocking Middle East oil
imports, or just by the fact that a benefit to the U.S. economy is a
common good which has been *paid for* in common.

The problem isn't that such a plant would not produce real value. The
problem is that a private individual, unlike the government, has no
way to *charge* others for the value that it would produce.

John Savard

Quadibloc wrote:

:On Feb 1, 3:31*pm, Fred J. McCall wrote:
:
: Why do you think the government should build such a thing when it
: isn't, by your own demonstration, currently economically viable?
:
:It isn't economically viable *for private enterprise*.
:

Then it's not economically viable for government, either. No magic
here.

:
:If I spend two billion dollars, and build a plant that can produce
:gasoline for cars at a price equivalent to $8.00 per barrel of crude
il... then, the Arabs can start selling crude oil for $7.80 a barrel
:the next day, and I don't make a cent.
:

In fact, you lose two billion dollars, which is a preposterously small
estimate. You can't just pull numbers out of your ass, you know.

:
:On the other hand, lowering the price of crude oil to $8.00 a barrel
:would benefit the American people in general, and thus two billion
:dollars would be a very modest investment, with a great return, on the
art of the U.S. government. Because, basically, it can recover its
:costs by collecting a *tax* on gasoline, or blocking Middle East oil
:imports, or just by the fact that a benefit to the U.S. economy is a
:common good which has been *paid for* in common.
:

If it's not economically viable, it cannot "recover its costs". If it
could recover its costs, it would be economically viable for private
industry to do.

:
:The problem isn't that such a plant would not produce real value. The
roblem is that a private individual, unlike the government, has no
:way to *charge* others for the value that it would produce.
:

Absolute rubbish!


--
"Ordinarily he is insane. But he has lucid moments when he is
only stupid."
-- Heinrich Heine

On Feb 1, 4:49*pm, Fred J. McCall wrote:
Quadibloc wrote:

:It isn't economically viable *for private enterprise*.

Then it's not economically viable for government, either. *No magic
here.

:The problem isn't that such a plant would not produce real value. The
roblem is that a private individual, unlike the government, has no
:way to *charge* others for the value that it would produce.

Absolute rubbish!

While you are correct that I just took arbitrary numbers to illustrate
my point - and the real numbers would be required to make an actual
decision - you *are* mistaken about this.

The basic situation is this:

At present, the United States economy is suffering because the price
of oil is high.

The Fischer-Tropsch process can produce fuel at a cost below current
OPEC prices. But *not* at a cost below the *marginal cost of
production* of many of the suppliers within OPEC.

A Fischer-Tropsch plant would require a considerable capital
investment. (Since the process is a well-known one, and had been
previously put into practise, I would have thought that $2 billion was
actually on the high side as a guesstimate, but this is not germane.)

If, however, the only option the builder of such a plant has to
*recover his costs* is selling the fuel it produces on the free
market... well, then OPEC undercuts him, so he loses his shirt.

But the price of oil goes down to $10 a barrel or something like this.
So *someone* is benefiting. If there were a way to get the people
deriving the benefit from the construction of the plant to pay for it,
then the plant could be built and the benefit derived. That's what
makes it viable for government, and not viable for private enterprise.

It's like building a bridge or a new road where putting a toll booth
on the bridge or road would tie up traffic so much that the bridge or
road wouldn't be worth building. Private enterprise can't derive money
from a road it builds except by putting a toll booth on it. The
government can pay for it out of gasoline taxes - and therefore it
doesn't have to charge *directly* for the benefit the road provides.

Lower gasoline prices are a common benefit, not one that can be
directly charged for - so something that lowers the price of gasoline
*without* making you the only one who can profitably provide it that
cheaply has to be paid for the way we pay for national defense or
lighthouses or libraries. This isn't magic; it's basic economics.

John Savard

Quadibloc wrote:

:On Feb 1, 4:49*pm, Fred J. McCall wrote:
: Quadibloc wrote:
:
: :It isn't economically viable *for private enterprise*.
:
: Then it's not economically viable for government, either. *No magic
: here.
:
: :The problem isn't that such a plant would not produce real value. The
: roblem is that a private individual, unlike the government, has no
: :way to *charge* others for the value that it would produce.
:
: Absolute rubbish!
:
:While you are correct that I just took arbitrary numbers to illustrate
:my point - and the real numbers would be required to make an actual
:decision - you *are* mistaken about this.
:

Not so much, no.

:
:The basic situation is this:
:
:At present, the United States economy is suffering because the price
f oil is high.
:

Wrong. At present, the United States economy is suffering because the
credit markets worldwide have locked up.

:
:The Fischer-Tropsch process can produce fuel at a cost below current
:OPEC prices.
:

Cite? You have shown no such thing.

:
:But *not* at a cost below the *marginal cost of
roduction* of many of the suppliers within OPEC.
:
:A Fischer-Tropsch plant would require a considerable capital
:investment. (Since the process is a well-known one, and had been
reviously put into practise, I would have thought that $2 billion was
:actually on the high side as a guesstimate, but this is not germane.)
:

It's certainly germane when you start talking about the government
"recovering its investment". You might want to look at the cost of a
single new conventional coal-fired power plant, a technology that is
certainly better understood than large scale synfuel production.

:
:If, however, the only option the builder of such a plant has to
:*recover his costs* is selling the fuel it produces on the free
:market... well, then OPEC undercuts him, so he loses his shirt.
:
:But the price of oil goes down to $10 a barrel or something like this.
:So *someone* is benefiting. If there were a way to get the people
:deriving the benefit from the construction of the plant to pay for it,
:then the plant could be built and the benefit derived. That's what
:makes it viable for government, and not viable for private enterprise.
:

Fuel is not a 'public good'. The folks deriving the benefit are those
involved in the use of the fuels and the things they're used to
produce. This is reflected in fuel prices. So the benefit of said
fuel is (or ought to be) fully recovered in the price of the fuel.

:
:It's like building a bridge or a new road where putting a toll booth
n the bridge or road would tie up traffic so much that the bridge or
:road wouldn't be worth building. Private enterprise can't derive money
:from a road it builds except by putting a toll booth on it. The
:government can pay for it out of gasoline taxes - and therefore it
:doesn't have to charge *directly* for the benefit the road provides.
:

No, it's not at all like that.

:
:Lower gasoline prices are a common benefit, ...
:

No, they are not. They are a benefit to those using gasoline. The
price of gasoline reflects the benefit of gasoline. Gasoline is not a
public good. Trying to claim that it is is intellectually dishonest
at best.

:
:... not one that can be
:directly charged for - so something that lowers the price of gasoline
:*without* making you the only one who can profitably provide it that
:cheaply has to be paid for the way we pay for national defense or
:lighthouses or libraries. This isn't magic; it's basic economics.
:

Yes, it is basic economics, and you have misrepresented what basic
economics says to the point where I'm willing to say you are either
grossly misinformed or deliberately lying.

What you are proposing is that the government take over the oil
companies, right? If not, just who gets the benefit of these billions
of dollars in 'gifts' from the government?


--
"False words are not only evil in themselves, but they infect the
soul with evil."
-- Socrates

On Feb 1, 8:52*pm, Fred J. McCall wrote:
Quadibloc wrote:

:At present, the United States economy is suffering because the price
f oil is high.

Wrong. *At present, the United States economy is suffering because the
credit markets worldwide have locked up.

Yes, it is also suffering from that cause as well. I didn't mean to
claim that the current stock market crash was a delayed reaction to
the October, 1973 oil embargo instead of being caused by sub-prime
mortgages.

:The Fischer-Tropsch process can produce fuel at a cost below current
:OPEC prices.

Cite? *You have shown no such thing.

I have seen this claimed. If it is not true, yes, this process is
irrelevant.

Fuel is not a 'public good'. *The folks deriving the benefit are those
involved in the use of the fuels and the things they're used to
produce. *This is reflected in fuel prices. *So the benefit of said
fuel is (or ought to be) fully recovered in the price of the fuel.

This is true. The government should not be giving away free gasoline.

:Lower gasoline prices are a common benefit, ...

No, they are not. *They are a benefit to those using gasoline. *The
price of gasoline reflects the benefit of gasoline. *Gasoline is not a
public good. *Trying to claim that it is is intellectually dishonest
at best.

*Assuming* the existence of a situation sometimes claimed by advocates
of the Fischer-Tropsch process, or those who have accused the oil
industry of a conspiracy to conceal its existence, whe

- a synfuel plant could certainly be built,

- it would require a big capital investment,

- it could produce fuels at a price below that of conventional fuel,
but

- it could _not_ produce fuels at a price competitive with the
*marginal cost of production* of the Saudis and the Kuwaitis

which I claim only is a _plausible_ scenario, not fact,

then a certain economic situation would exist, where a private company
could not build such a plant and recoup its costs (conventional oil
producers could undercut it)... but the government of an oil-importing
nation _could_ build such a plant usefully, since it would be in a
position to directly reap the gains of a reduction in the world price
of oil, even if the plant itself never produced a drop of fuel.

What you are proposing is that the government take over the oil
companies, right? *If not, just who gets the benefit of these billions
of dollars in 'gifts' from the government?

The government builds this plant.

The price of oil falls to $10 a barrel on world markets.

To make fuel users pay for the benefits building the plant bought, the
government taxes imported oil.

The plant, though, produces fuel at a price equivalent to, say, $11 a
barrel, (or $10.01 a barrel, assuming OPEC wouldn't drop its prices
any more than it had to) so if a private person had built the plant,
he would have been left with no way to get his money back - it would
have been an act of philanthropy with no business plan attached.

Basically, I am saying that because there is this huge gap between

what OPEC charges for oil, and

how cheaply the Saudis can pump the stuff out of the ground,

that there are a huge number of energy technologies that would improve
on our current situation that aren't viable for private enterprise
because they would be undercut as soon as their effect was felt in the
market. So to expect private enterprise to solve the energy crisis
means waiting until either someone comes up with a way to produce
energy that's cheaper than oil can be pumped out of the ground, rather
than just one that's cheaper than its current price or someone comes
up with a way that only beats OPEC's price, but which also requires no
capital investment.

This is the point that keeps getting missed by the people who claim
the Fischer-Tropsch process is being kept a secret by the bad old oil
companies. The oil companies are not the culprit!

The problem is politicians failing to recognize that the free market
can't solve every problem. A company might do something about the
smoke coming from its smokestacks for better public relations, but
since you can't charge people for breathing, sometimes air quality
standards need to be imposed.

John Savard

Quadibloc wrote:
:
:*Assuming* the existence of a situation sometimes claimed by advocates
f the Fischer-Tropsch process, or those who have accused the oil
:industry of a conspiracy to conceal its existence, whe
:
:- a synfuel plant could certainly be built,
:

Of course it COULD. The question is whether or not it makes sense to
do so.

:
:- it would require a big capital investment,
:

Quite.

:
:- it could produce fuels at a price below that of conventional fuel,
:

Not shown anywhere and I think someone is delusional if they believe
that.

:
:but
:
:- it could _not_ produce fuels at a price competitive with the
:*marginal cost of production* of the Saudis and the Kuwaitis
:

Then how the hell could it "produce fuels at a price below that of
conventional fuel"? Is the claim that the marginal cost of production
is lower than the RETAIL price of oil?

Even that has not been shown.

:
:then a certain economic situation would exist, where a private company
:could not build such a plant and recoup its costs (conventional oil
roducers could undercut it)... but the government of an oil-importing
:nation _could_ build such a plant usefully, since it would be in a
osition to directly reap the gains of a reduction in the world price
f oil, even if the plant itself never produced a drop of fuel.
:

The preceding paragraph makes absolutely no sense whatsoever.

Neither does what follows it (which I have elided), unless you are a
fan of the old Soviet system of economics and central control.

[We know where that leads to.]


--
"Ordinarily he is insane. But he has lucid moments when he is
only stupid."
-- Heinrich Heine

On Feb 3, 5:01*am, Fred J. McCall wrote:
Quadibloc wrote:

:- it could produce fuels at a price below that of conventional fuel,

Not shown anywhere and I think someone is delusional if they believe
that.

:but

:- it could _not_ produce fuels at a price competitive with the
:*marginal cost of production* of the Saudis and the Kuwaitis

Then how the hell could it "produce fuels at a price below that of
conventional fuel"? *Is the claim that the marginal cost of production
is lower than the RETAIL price of oil?

Even that has not been shown.

Marginal cost of production is how much it costs the producer to pump
the stuff out of the ground... and other handling and shipping costs.

I presume that if the Saudis were losing money on every barrel of oil
they sold, they would stop doiing it.

:then a certain economic situation would exist, where a private company
:could not build such a plant and recoup its costs (conventional oil
roducers could undercut it)... but the government of an oil-importing
:nation _could_ build such a plant usefully, since it would be in a
osition to directly reap the gains of a reduction in the world price
f oil, even if the plant itself never produced a drop of fuel.

The preceding paragraph makes absolutely no sense whatsoever.

1) The Saudis have a lot of oil.

2) It's old-style conventional oil. They can pump it out of the ground
pretty cheaply.

3) But they can sell it for a high price.

On the cover of a recent Wired Magazine, for example, it was claimed
that high oil prices were a blessing in disguise, because they would
promote the development of energy alternatives.

What I'm trying to say, but apparently am having little success in
making clear, is that if the Saudis and the Kuwaitis and so on were
getting their oil from *oil sands* and *oil shales* and the like, this
would make sense. Oil production would be costly, and so any private
firm that could produce fuel more cheaply could take over the market.

But because the high price is due to limits in supply, not a *high
cost of production*, the situation a private investor in energy
production actually faces is quite different.

Since a private producer of fuel can recoup his costs, and earn
profits, only by selling the fuel he produces on the open market...

and since the Saudis can make a profit, even though a smaller one, if
they faced a free market price for oil that's a lot lower than the
current price,

a private company that invested a lot of money in a way of producing
fuel that beats current world oil prices, but doesn't beat the Saudis'
cost of production, is vulnerable to being undercut.

If one assumes, though, that $8 a barrel of oil is a good thing for
the American people in general, what is a suicidally stupid investment
for private individuals is a great idea for the country. Apparently,
though, the government feels tax writeoffs for oil sands development
make more sense than directly building their own Fischer-Tropsch
plants, and there may indeed be good reasons for that. But it is a
similar principle.

John Savard

Quadibloc wrote:

:On Feb 3, 5:01*am, Fred J. McCall wrote:
: Quadibloc wrote:
:
: :- it could produce fuels at a price below that of conventional fuel,
:
: Not shown anywhere and I think someone is delusional if they believe
: that.
:
: :but
:
: :- it could _not_ produce fuels at a price competitive with the
: :*marginal cost of production* of the Saudis and the Kuwaitis
:
: Then how the hell could it "produce fuels at a price below that of
: conventional fuel"? *Is the claim that the marginal cost of production
: is lower than the RETAIL price of oil?
:
: Even that has not been shown.
:
:Marginal cost of production is how much it costs the producer to pump
:the stuff out of the ground... and other handling and shipping costs.
:

Yes, I know.

:
:I presume that if the Saudis were losing money on every barrel of oil
:they sold, they would stop doiing it.
:

Now try reading what I wrote in context.

IS YOUR CLAIM THAT THE MARGINAL COSTS FOR A GALLON OF SYNFUEL ARE
LOWER THAN THE RETAIL PRICE OF OIL?

IF SO, ****PROVE IT****!!!!!

Clear now?

repeated silliness elided


--
"Some people get lost in thought because it's such unfamiliar
territory."
--G. Behn