Coal to Liquid Fuel is Cheaper Than Petroleum, According to Study

A study by the Center for Forensic Economic Studies has found that converting coal to liquid fuel has offered significant strategic benefits for meeting the energy demand of the United States. The study was made possible by John W. Rich Jr., president of WMPI Pty, LLC in Gilberton, Pennsylvania since Rich is planning to build a coal-to-liquid fuel plant in the area.

The cost per barrel of importing oil is approximately $80 and if you factor in other costs like the $24 import premium, the $124 import multiplier that signifies that every time one dollar is spent on foreign goods 6.2 times that dollar goes out of the United States, which has a negative effect on economic growth, and $10 refining and markup costs, the per barrel price of oil is actually $228. The study then stated that the price of a gallon of gas is actually $5.67 instead of the $2.79 approximate selling price which doesn't actually reflect the real cost of oil importation.

On the other hand, coal-to-liquid fuel is $80 per barrel and the cost to produce is $1.90 per gallon, adding $3.76 to the economy. Brian P. Sullivan and Leo Turcotte, the study's authors, stated that it makes economic sense to produce liquid fuels from coal instead of importing crude oil. While consumers seem doesn't seem to pay for the import premiums on crude oil, society as a whole collectively pays for the import premiums. Indirectly, consumers pay for these import premiums through higher taxes, high unemployment and weaker economy.

The study stated three primary reasons for import premiums: 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, and the cost of deploying the military to maintain access to overseas oil supplies.

The Study stated that the US can actually reduce these import costs by turning to coal-to-liquid fuel. According to the study, the US has 270.7 billion short tons of recoverable coal, almost 27% of the world's reserves, if the US uses coal-to-liquid fuel instead of importing foreign oil, it will improve the economies of the coal-bearing states and the United States as a whole. Reducing dependency on foreign oil will also increase revenues, and create domestic jobs in the energy sector at cost that is much lower than what the country is paying for foreign crude.

SOURCE:

WMPI Pty, LLC, "Study Finds Coal-to-Liquid is Cheaper Than Petroleum". PRnewswire.com