One of my crude measures of the long range energy picture has always been coal-to-liquids. At some price (the usual number I hear is somewhere at or above $60 or $70 a barrel) it becomes economical to make liquid fuels out of coal. Given Appell’s Theorem, it has seemed inevitable to me that, regardless of the climate consequences, people will end up doing this. The question has been why they aren’t pushing it now, with oil north of $120 a barrel? One possible answer is that the people who have skin in the game are not confident that oil will stay there.

Via Daniel Hall, I see that we’ve now got our first live CTL plant proposal. We’re not talking about a huge plant here. Daniel’s take:

It seems to me like CTL puts a backstop on how high oil prices can remain in the long run, at least if coal production is not constrained.  Of course in a world with a price on carbon emissions the CTL fuel is going to have to be a good bit cheaper than oil on a production-cost basis, since CTL involves about 3 times the amount of greenhouse gas emissions as conventional oil.


  1. Well that’s a nice thought as I go off to sleep tonight. And you’re most probably right. Speaking of “skin in the game”, it was fun to watch T. Boone Pickens talk up wind to Sen. Pete and one of his committees the other day. Still, I wonder how many T. Boone Pickens out there aren’t thinking wind, but more in keeping with Appell’s Machiavellian little Theorem.

  2. Does anyone have a comprehensive quantitative macro analysis of the future of energy production?

    There are many questions that seem to be glossed over in standard analyses.

    John pointed me at an article that showed that small increases in efficiency across a number of methods of production would be enough to reduce our carbon footprint sufficiently.

    What this article, and everything else I have read, leaves out is the socioeconomic consequences of a particular action.

    The recent collapse of the Doha round of trade negotiations hinged on protectionism for farmers in developing countries. The developing countries wanted to be part of a world market but wanted to shield their own farmers against outside competition while not shielding farmers in large countries like the US.

    So, a first large question on energy production might be:

    If coal to liquid is successful and this makes coal rich countries like the US, Germany, Canada, and China the de facto controllers of the world economy and makes oil rich countries like Saudi Arabia and Venezuela more unstable with fewer jobs for the desperate, does CTL spawn greatly increased terrorism against the US?

    If anyone has thoughts or references on the energy picture beyond the competition of specific technologies, I would like to know these thoughts.


  3. Thanks John.
    I read about 40 of EIA’s spreadsheets. They all look like, item by item, linear projections of the status quo. I do not see any number that would reflect changing percentages of the production pie, development of new technologies, or shortages of capital to pay for increasing electric costs. So, for a specific, their is no hint that China would be willing to turn off its industry so that Olympic athletes might be able to breath.

    New technology, the green movement, and geopolitics all seem to be missing from the projections. On the surface, the projections seem to be linear projections of energy consumption as of about 2004. Linear projections are the easy and politically safe thing to do, but, given the ferment over new energy technologies, are very likely to be wrong.

    Do you know of more comprehensive predictions that include all the factors that seem to be left out of EIA’s poitically simple predictions?


  4. There’s no set price of oil at which it will be cheaper to synthesize liquid fuel from coal. It depends on the price of coal, and the costs of building the coal to liquid plant. The price of oil is way up, but so is the cost of producing a coal to liquid plant (for these plants capital costs make up a larger percentage of costs than for oil refining), and the price of coal is also trending up. But the price of oil has risen faster than the other costs, so if this trend continues at some point people will want to build coal to liquid plants.

  5. It is great to see the good news here-The nation’s first coal-to-liquid (CTL) plant will be constructed here in the Ohio Valley in Marshall County at Benwood, WV. It’s a joint effort between CONSOL Energy and Synthesis Energy Systems (SES).

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