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Think big, think coal, and think grand

Building a new industry to extract oil from coal is perhaps the only long-term strategy that can reverse the erosion in American economic power. Coal is the low-cost base for producing the synthetic oil needed to replace petroleum in our lifetimes.

Such a new industry can put 30 million workers on payrolls over the next decade and can eliminate the US trade deficit. Coal is the only asset where reserves are so enormous that the US can both satisfy its domestic demand for liquid fuels and pay down its foreign debt with exports of syn-oil to the rest of the world.

Today, a negative trade balance is the major structural flaw in the US economy. The US economy will remain depressed until trade reform becomes the nation’s top priority. That isn’t going to happen before 2013, at the earliest. The duration of this depression is still open ended.

The US has acted in the conviction, unique among nations, that it can import itself to wealth. The leaders of every other country in the world strive mightily for positive trade balances. Are we that much wiser than nations that have endured for millennia?

The US will import an estimated $600 billion more than it exports this year. We will send about $400 billion out of the country just to buy oil and petroleum products. The total value of wealth leaving the country from negative trade balances since 1992 is $7.3 trillion. About half of this debt is still out there waiting to be redeemed. In the expansion years, we were beggared by our neighbors.

The drag on the economy from importing so much of the goods and services we consume must be reduced. The hard truth is that we aren’t going to get back to balanced trade with the rest of the world until we can sell large quantities of something the world holds dear. Exporting jet aircraft, popular music, motion pictures and agricultural products alone won’t cut it.  Right now, there aren’t all that many things foreigners are willing to buy from us.  But oil is on everyone’s shopping list and coal can be liquefied to syn-oil for about half the $90/bbl current world oil price. The best part is that we have coal, big time.

The trend for conventional oil is toward ever-higher prices as easily recoverable oil reserves have been exhausted and oil is getting more and more expensive to pump out of the ground.  Fusion power is still 10 to 20 or more generations away. Now is the time to liquefy coal to oil, put millions of Americans to work in high paying jobs in the private sector, and become a net exporter of oil.

Every four years the nation decides whether to change leadership.  I hope to have the option of voting next year for a candidate who believes that syn-oil makes even more sense today than it did in the 1970s when the Project Independence report recommended it. I want the chance to vote for a candidate who believes spending $5 trillion in new syn-fuel plants and more than doubling coal output over the next decade is a grand strategy.


Clifford Neely
October Consultants
Potomac, Maryland