Can alternative energy resources be brought into large-scale use in the united states by the year 2000?

Abstract

The greatest single barrier to the replacement of imported crude oil with alternative indigenous fuels on a substantial scale is an economic one. Alternatives to natural crude oil (for liquid fuels) will be more expensive for many years in the future. For example, a study made in 1977 by the National Research Council suggests that synthetic crude oil could be produced from coal at a cost of between $20 and $30 per barrel (1976 dollars). Some experts believe that this estimate should be raised to $25 to $40. Comparing this with OPECs October 1979 price of $14.54 per barrel, it is unrealistic for us to expect that synthetic crude oil will compete with natural crude oil very soon. By the time there is a true economic competition it will probably be too late for the major oil importing countries to do much about it. Plants for the production of synthetic crude oil will be both large and expensive. The capital cost of a plant capable of producing 50,000 barrels of synthetic crude oil per day from coal is estimated to be about $1 billion (1976) and would take about 5 yr to construct. If this is the case, the processes of capital accumulation, R&D, design, and construction of the first generation of synthetic crude oil plants would have to be started immediately to achieve some measure of self-sufficiency by the turn of the century. Clearly this is unlikely to happen in the absence of a substantial involvement of the federal government in the effort. As much as we might wish otherwise, it is unlikely that there is a solution to this problem through “the free play of the marketplace”. Recent studies suggest that if synthetic crude oil were to cost $40 per barrel fed to U.S. refineries, gasoline without tax would cost less than $1.30 per gallon (1976)—which is still substantially less than the price paid for gasoline in 1976 in Europe and Japan. This suggests that the necessary capital for the construction of synthetic crude oil plants could be accumulated through use of a graduated gasoline tax which, in 1976 terms, would lead eventually to a price of gasoline to the consumer of about $1.30 per gallon. At the present time fuel-grade ethyl alcohol can be produced from sugar or corn for about $1.25 per gallon. Because of the lower fuel value of alcohol per gallon this price would correspond to gasoline costing $1.80 per gallon. However the Brazilians have recently demonstrated that if pure alcohol is used in automobiles with proper carburetor adjustments, the achieved mileage per gallon is actually about the same as that of gasoline, largely because of the more efficient combustion. The important conclusion for us to ponder is that, once the people of the U.S. reconcile themselves to paying about $1.30 per gallon (1976) for gasoline, many possibilities emerge for achieving energy independence on a time scale which is commensurate with the need. Other sources of liquid fuels would emerge including oil shale and extensive secondary and tertiary recovery of crude oil from depleted domestic fields. The greatly increased price of gasoline (and other refinery products) would undoubtedly result in the adoption of more intensive conservation practices and an accelerated shift to other fuel sources to fill needs other than transportation.