The United States Senate soon will vote on proposals to cut funding for the US Synthetic Fuels Corporation (SFC). This government agency exists to provide financial assistance to companies building commercial-scale projects to produce synfuels from oil shale and coal. The Senate action has been spurred by declines in world oil prices, a desire to cut the federal deficit, and serious congressional concerns about management of the corporation.
Synfuels opponents argue that the strategic petroleum reserve, not the SFC, is the appropriate US response to the threat of a disruption in oil imports. The reserve and the SFC are thereby cast as duplicative efforts. But this view fails to separate short-run from long-term threats of growing oil-import dependence.
The oil reserve and the SFC actually are complementary elements of a national program to deal with a stark reality: US petroleum reserves are declining and the vast reserves of the Persian Gulf will have to be called upon increasingly in the future to make up the shortfall. The reserve program, under which a large volume of oil is stored underground, exists to deal with acute problems caused by any limited interruption in oil imports or attempt by exporters to manipulate prices. By contrast, the SFC program, which seeks to manufacture synthetic fuels , can get the US started on a solution to the longer-term problem of declining US petroleum reserves by tapping our vast coal and oil-shale resources.
A new report by the congressional Office of Technology Assessment concludes that declining domestic oil production will increase America's vulnerability to an oil shortfall despite the oil stored in the strategic petroleum reserve and available private oil stocks.