As the General Assembly and Gov.
Edward G. Rendell begin debate on an alternative energy program for
Pennsylvania, a recent study by the Center for Forensic Economic Studies
found converting coal to liquid fuel offered significant strategic benefits
for meeting energy demand nationwide and helping depressed coal regions
such as those in the Commonwealth.
"Given that the U.S. has 270.7 billion short tons of recoverable coal,
or 27% of the worlds' total reserves, the United States can reduce its
dependency on foreign oil, improve the economies of the coal-bearing states
and the country as a whole, increase revenues at the local, state and
federal levels, and create domestic jobs in the energy sector and beyond,
at a cost that is lower than what we are currently paying for foreign
crude," the report states.
The study was commissioned by John W. Rich Jr., president of WMPI Pty,
LLC in Gilberton, PA, where Rich is working to build the nation's first
coal-to- liquid fuel plant.
The $800 million plant will be located on a 75-acre site adjacent to
the existing Gilberton Power Plant just north of Interstate 81 and about
two miles east of Route 61 and Frackville, PA.
The study also found the price consumers are paying at the pump does
not reflect the real cost of importing oil.
According to the study, the market price fails to include other costs
that actually boost the price per barrel from the approximately $80 it is
today to $228 when you factor in the $24 import premium, its $124
multiplier, and the $10 refining and markup costs.
This puts the actual price of a gallon of gas at $5.67 instead of the
approximately $2.79 that it is selling for today when derived from oil.
Coal- to-liquid fuel, on the other hand, is, at $80 per barrel the cost of
crude, significantly less expensive to produce at $1.90 per gallon. And it
simultaneously adds $3.76 per gallon to the economy.
"It makes economic sense to produce liquid fuels from coal instead of
importing foreign crude oil," according to the study's authors, Brian P.
Sullivan, Ph.D. and Leo Turcotte, Ph.D.
The import premium, also referred to as "social costs," is what society
collectively pays to buy oil overseas, the authors explain.
"These costs are paid indirectly through higher taxes, high
unemployment, and a weaker economy," the authors wrote.
The primary reasons for import premiums are:
- Costs due to market disruptions and price shocks caused by fluctuating
economic conditions;
- The fact that because the United States is such a major consumer of
overseas oil its demand affects prices;
- The cost of deploying the military to maintain access to overseas oil
supplies.
The $124 import multiplier signifies that every time one dollar is
spent on foreign goods or oil 6.2 times that dollar goes out of the United
States, which has a negative effect on economic growth.
"When the U.S. imports oil from abroad, those dollars are removed from
the economy," according to the study.
Source: WMPI
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