With hardly an audible gurgle, the U.S. Synthetic Fuels Corporation died a few days ago. It was a melancholy end to an enterprise that had been launched, seven years ago, by the House of Representatives with a vote of 368 to 25. That was at the height of the 1979 oil crisis, with its gasoline lines. The SFC was designed on a grand scale. President Carter foresaw an $88 billion program. The House set a production goal of 2 million barrels a day of synthetic fuels by 1992. That's substantially more than Exxon's worldwide oil production.
As it turned out, over the years, the corporation found only four projects to support; only one is in production. The SFC spent some money, accomplished little, and eventually died of bad luck and bad management -- for the Reagan administration repeatedly inflicted poorly equipped directors on it. What lessons can you draw from this fiasco?
The SFC was a classic case of a crash program, and crash programs are always dangerous. In the confusion of its creation, Congress gave it two roles inconsistent with each other. Some of its authors thought of it as a vehicle for developing and testing the technologies to produce synthetics. But some wanted it to be a producer -- the largest producer in the world. Congress also assumed that, with price guarantees, the major oil and chemical companies would leap at a chance to get into synthetics. With only two exceptions, that proved to be wrong.
The most successful of the past decade's synthetics projects make gas from coal, but it's liquid fuels in which the country is dependent on imports. The liquid fuel projects have not worked out as well. The drop in oil prices has been only the final blow.
And yet there was a useful and sensible idea in the concept of federal support for synthetic fuel development. It got buried under all the hype, the muddle and the incompetence that came to characterize the operation. But learning how to extract oil from shale, or how to make it from coal, is not a foolish endeavor. American domestic oil production is likely to decline in the years ahead regardless of price. The world's greatest reserves of oil continue to be those around the Persian Gulf -- which in political terms, by bad luck, is also one of the world's least stable and most vulnerable regions. How long will the present surpluses of oil, and the low prices, continue? Experts disagree. Some think three years, some think longer. You will have great difficulty finding anyone who believes that they will last very far into the 1990s.
There's no need to mourn the demise of the SFC. It didn't work. But there is still a high probability that this country will need, before the end of the century, energy technologies that it does not have and that it is not developing.