Coal-to-liquids / Oil price

Posted by William M. Connolley on September 16, 2008
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On the list of things to read-n-blog since before the summer hols has been John Flecks oil-to-liquids post.

John says, quite perceptively, 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… 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.

Oil is now well south of $120, indeed its about $90 as I speak, though of course the exchange rate has also shifted in that time. But it wouldn’t be odd if it fell further. If you know the answer, vote in theoildrum‘s poll. Well if you *really* know the answer, don’t waste your time on the poll, buy/sell oil futures as appropriate :-).

I’ll link Debate on coal heats up as climate protests reach climax from Nature here, since it doesn’t look like getting its own post. Nor does Get your terawatts here, even though its pretty much agrees with my take.

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  1. #1 Nick Barnes
    2008/09/17

    I wondered this myself when oil hit $70, and since then I have read about a number of plants being built, in China and I believe in Oz.

    But it takes a long time, years, for large-scale coal-to-oil plant to come online. It’s quicker than opening up a new oil field, which is 10+ years, but it’s not like flicking a switch. The oil price hasn’t been so high for all that long, nobody was expecting it to reach the levels it did (indeed, it’s not that long since oil was under $10/bbl and forecast to go down to $5), and for a while a lot of people were saying that the high price was all down to speculation (and therefore would collapse like a bubble). I think that the high price was natural supply-and-demand, and will be back when the global economy comes back from this Greenspan recession. We’ll see.

  2. #2 Todd B Norris
    2008/09/17

    From what i heard is even if it is cheaper then that of $70-$90 a barrel to produce it is still a lot higher on the carbon end product then oil is, so that maybe one of the reasons for delay. Also, I am of the opinion that oil price was falsely risen to $120/barrel and because of this falseness there was not enough time to fully look into radically different changes in fuel type.
    -=tbn=-

  3. #3 Eli Rabett
    2008/09/17

    Nick, if you don’t care much about pollution then you can get coal to oil up fairly fast, as the Germans did in WWII and as was done in South Africa

  4. #4 Eli Rabett
    2008/09/17

    The issue here, as with renewables, is NOT what the price of oil is, and not even what the price of oil will be, but what the cost of production plus taxes is. The reason being that oil producers can always cut their price to that floor and bankrupt any competition. Governments by establishing taxes at levels where it is economical to invest in coal to oil or renewables can ensure investment. OTOH, if your level is too high you will make the products produced in your country non-competitive, thus the beauty of Eli Rabett’s Simple Plan to Save the World. I think I have pointed this out to John before.

  5. #5 Dave Rado
    2008/09/23

    Slightly OT, but I just looked at your link to your take on renewables, in which you promote large scale photovaltaics. My understanding is that concentrating solar thermal power is a far more hopeful option. Franz Trieb emailed me the following a few months ago:

    Dear Dave,

    You will find all relevant information in the quoted studies.

    http://www.dlr.de/tt/med-csp

    http://www.dlr.de/tt/trans-csp

    http://www.dlr.de/tt/aqua-csp

    The article – at least my portion – is not about solar (photovoltaic PV) cells but on concentrating solar thermal power (CSP). This technology does not store electricity as it produces and stores heat for operating conventional steam turbine power stations. Two 50 MW plants are presently build in Spain with storage capacity for 8 hours night-time operation, a 64 MW plant was recently commissioned in Nevada, U.S. A total of 415 MW is on the grid world wide.

    The collectors continuously track the sun (for the concentration of direct sunlight) and therefore they can be put in a protective position if a sandstorm comes up. Those plants are operating since 20 years in the Californian Mojave desert and have survived sandstomes, hailstormes and twisters. The biggest plant there has 150 MW capacity. Strange thing that this is fairly unknown as those plants are on the grid since the mid eighties of the last century.

    High voltage direct current (HVDC) transmission is expected to loose about 10 % from Morocco to Germany, as an example. This technology is running world wide since the 1970ies. It will add about 1-2 c/kWh to the electricity generation cost which will be about 4-5 c/kWh in the medium and long-term. The cost of CSP comes done with production volumes, about 10-15% each time the installed capacity doubles (this in fact is true for most technical devices, but not for fossil fuels, as they are no technical devices but limited resources).

    The collectors replace fuel in conventional power plants, today at a cost equivalent to about 50-60 $/barrel fuel oil (that means they are already cheaper than oil!!). A pre-requisite for achieving equivalent costs of 15 $/barrel after 2020 will be the expansion of installed capacity, that means that people must start acting and stopp talking. That’s what the Algeriens finally did and I can only congratulate them for this, because talking another 10 years about possible problems (like most politicians did for the past ten years) will not solve them and will delay the moment when 15 $/barrel can be achieved for exactly the same time span (that’s in fact the major uncertainty).

    Our numbers have been published in Sustainability Science (Springer) and by the Club of Rome (www.trec-eumena.net) in its Whitebook to the European Parliament that will be released on November 28, both thoroughly peer reviewed.

    At the trans-csp website you’ll find several useful links for more information.

    Best regards
    Franz< \blockquote>