Re: Fischer-Tropsch News Item

On Feb 1, 4:49 pm, Fred J. McCall <fjmcc...@xxxxxxxxx> wrote:
Quadibloc <jsav...@xxxxxxxxx> 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
:problem 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
.

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