Re: Fischer-Tropsch News Item

On Feb 1, 8:52 pm, Fred J. McCall <fjmcc...@xxxxxxxxx> wrote:
Quadibloc <jsav...@xxxxxxxxx> wrote:

:At present, the United States economy is suffering because the price
:of 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, where:

- 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
.

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