Stonewalling Synthetic Fuels

AMERICA'S LONG-LASTING marriage to the automobile, and the heavy dependence of the national economy on petroleum, has given birth to an international oil industry that has been able to exert an overpowering influence over its parents. The overgrown offspring is a quasi-autonomous international cartel that often gives it own interests priority over those of its mother country. Abuse of the economic and political power by the oil companies was not the sole cause of the recent quadrupling of world oil prices, but the industry has moved to suppress the entry market. The discouragement of synthetic fuel research has been industry policy since the 1920s, and has caused a tremendous waste of American natural resources and an accretion of wealth and political power to our foreign oil suppliers.

The American economy depends on the oil companies for all of its petroleum, which fulfills over 40 per cent of its energy needs, and for much of its coal, which supplies about 20 per cent of the nation's energy. It is now in the national interest to widen and vary America's energy sources but the oil companies do not want such diversification. The introduction of new synthetic sources of energy would reduce both the major companies' profits and their control over the market.

A clear manifestation of the oil industry's desire to retain its control over the energy market is the publicity campaign it has waged against the introduction of methynol additives to gasoline. It has long been known that methynol--also known as wood alcohol--which can be derived from coal, natural gas, wood waste or recycled garbage, can be added to gasoline to stretch petroleum supplies and improve mileage. The widespread use of automobile fuel, composed of 70 per cent gasoline and 30 per cent methynol could eliminate American dependence on foreign oil supplies. But the oil industry claims that adding methynol to gasoline reduces mileage and acceleration, causes corrosion, and would require the modification of automobile engines. The Federal Energy Office has backed these contentions, but Dr. Geoffrey Frantachy, who is participating in California methynol feasibility studies, observed that. "The oil company's market would be cut by 15 to 30 per cent; they control much of the energy industry, but not methynol, and they'll suppress it whenever they can regardless of the national interest."

A LESS OBVIOUS example of industry and government acting in the interests of the oil companies rather than the public has been the longstanding discouragement of the production of oil from coal. The government and the industry have sponsored several small liquefaction plants but have warned that no commercial liquefaction of coal will be possible before the early 1980s. The Interior Department has estimated that a $2 per barrel subsidy may be necessary to encourage the reproduction of synthetic petroleum.

The technical problems encountered in coal liquefaction may seem to the layman to justify the granting of government subsidies. The process requires the introduction of large amounts of hydrogen to coal at high temperatures and under very great pressure: it results in a rough equalization of the ratios of hydrogen and carbon molecules in coal. Frederich Bergius developed the process for turning coal into crude oil in Germany in 1913, and Franz Fischer and Hans Tropsch devised a catalytic process for converting coal directly into gasoline in 1925. During World War II the Bergius and Fischer-Tropsch processes supplied the Nazi government with petroleum, and in late 1945 several German liquefaction plants were dismantled and brought to the United States for study.

This imported technology supplemented American liquefaction projects which by 1926 had proved the feasibility of producing coal from oil. In fact, early Bureau of Mines tests in commercial scale plants at Rifle, Colorado, showed that oil could be made from coal at no cost per barrel when produced in series with a steam-generated electric power plant, using its excess steam to produce gasoline, a smokeless solid fuel, and liquid fuels worth more than the cost of the raw coal itself.

THE OIL INDUSTRY has publicly scoffed at and privately feared technological advances in coal liquefaction Federal energy administrators, who have often been recruited from the oil industry, are either being deceived by their experts or are deliberately misinforming the investing public about technological advances in synthetic oil production. Meanwhile, the large oil companies have ignored coal as a source of oil and are turning to distilling oil from shale. In extracting shale oil the companies are determined to distill the shale above ground, instead of underground, which is the cheaper and less environmentally--destructive method. Technologists in the Bureau of Mines have estimated that shale oil can be distilled underground for less than a dollar a barrel, but, in the words of one Justice Department lawyer, "The world oil cartel fears that the cheap production of oil from coal, or shale oil distilled underground, might bring about a reduction in price."

George Otis Smith, head of the U.S. Geological survey during the period of early technological break through in coal liquefaction and shale oil production in the 1920's, congratulated the engineers responsible saying. "You men have proved something more valuable than any other researchers in the federal government. We now know that we have enough cheap oil in our coals to last for ever." But Gifford Pinchot, the conservationist, had enough experience with the power of large companies acting in collusion to warn, "The fuels trust will never permit the shale oil and oil from coals projects to get developed unless they own them."

Pinchot's propheev has been fulfilled. The nation's oil companies represent a valuable reservoir of technology and capital, but when they act together with the connivance of government, the companies wield economic power sufficient to present the use of American energy sources in a manner consistent with the national interest. The oil industry's opposition to coal liquefaction, cheap shale oil and the stretching of domestic oil supplies through methynol production has caused a tremendous waste of natural resources and a large scale misallocation of technology and capital.

Government collusion with the oil companies in their opposition to synthetic fuels has been largely confined to the sub-cabinet level. The exchange of personnel and other lateral interchanges between the oil industry and the middle levels of the government energy management bureaucracy should not continue. Anti-trust action directed at the oil companies and the separation of government agencies and the industry will avoid further exclusion of synthetic fuels from the energy market. The recent quadrupling of global petroleum prices has changed oil industry price fixing from an international annoyance to a vital economic issue.