Wednesday, March 28, 2007

Coal Latte, a boon? Or a mistake?

Oil at $15 a barrel? concerns a process developed by Silverado Green Fuel to turn marginal coal into a liquid fuel. The liquid fuel can function just like gasoline and they claim it can be sold for $15 per barrel, so in this age where we are staring $100 per barrel oil in the face some obviously would see this as an advantage. Plus they've managed to paint this thing as a green fuel.

The claim their products are free of nitrogen, sulfur, particulate matter, and heavy metals and I suppose this is the rationale for calling this a "green" fuel. However it still contains carbon, fossilized carbon, so burning this fuel adds carbon to the ecosphere.

There are a couple keys to this .. first, this sort of coal is under a low demand hence the raw material has a low cost. Second, there is a lot of it and this sort of coal is spread pretty widely around the world. In the U.S. alone, the existing coal reserves hold enough coal to produce liquid fuel that would be the equivalent of 800 billion barrels of oil.

In the cost equation there are high capital costs due to building plants and transportation of the coal to the plants. According to the CNET article this fuel will be attractive only if fossil oil remains above $45 per barrel.