Fossil Fuels

Normally when we think of fossil fuel feedstocks, we associate particular types of fuel with individual feedstocks, and, moreover, we tend to think of all conventional feedstocks with the exception of petroleum as being utilized in what is more or less their raw or native forms. To whit, both coal and natural gas retain their overall form and composition in the finished product, and are merely subjected to shaping or pulverization in the case of coal and the removal of impurities in the case of natural gas. Only in the case of petroleum, whether conventional or unconventional, is the raw product, namely crude oil, transformed into a multitude of refined products—or so goes the conventional thinking.

Such notions adequately characterized the fuel industry in the past, but today they must be qualified. Increasingly, we believe, the refined liquid fuel products associated with the petroleum sector are going to be derived from other fossil fuel resources including bitumen, oil shale, coal, unconventional natural gas, and methane hydrates. Already large quantities of distillate fuel (diesel) are being produced from natural gas in Qatar, and tar sand excavation is proceeding apace in Canada. Inevitably, unconventional sources will be increasingly utilized in order to satisfy the global demand for liquid fuels, and a number of unconventional processes will be employed to transform coal, kerogen, and methane into diesel, kerosene, gasoline, and an enormous number of petrochemicals.

That said, we must now turn our attention to the full range of finished fossil fuel products, that is, the substances that are consumed directly to provide heat or motive power.

Categories of Fossil Fuel Products

Perhaps the simplest way to categorize fossil fuel products is to group them according to phase state, i.e. solid, liquid, or gaseous. In fact we will abide by this schema, but here it must be said that it is not quite so straightforward as one might assume. In at least three instances substances which are gaseous at room temperature and at sea level atmospheric pressures, are utilized as fuels in liquid form, with liquefaction occurring in response pressure in the first two instances and freezing in the third.

Solid Fuels

Most solid fossil fuels are derived from coal. Coal is generally shaped into briquettes which sometimes contain wood fibers to assist in maintaining shape. Coal may also be pulverized, which is the form in which it is generally used in coal fired electrical generation plants.

In addition, coal may be treated thermally and/or chemically in various ways to improve combustion properties and reduce emissions. Coke, which is a torrefied form of coal resembling charcoal, is an example of a refined solid coal product. Coke, incidentally, may also be produced from petroleum.

Another form of solid fossil fuel is pulverized oil shale, currently used only in Estonia. Formed peat blocks might also be included in this small grouping.

Solid fuels constitute a mature market and one that seems unlikely to experience explosive growth in the future.

Liquid Fuels

Liquid fuels derived from fossil fuels sources include the following: coal slurries; residual oil, distillate fuel, kerosene, gasoline; the various alcohols such as methanol, ethanol, isopropyl alcohol, butyl alcohol, and so on; and the ethers, including MTBE and ETBE.

The members of the second sub-group beginning with residual oil are usually thought of as refined petroleum products while the alcohols are more likely to be associated with biomass or natural gas, but in fact both groups can be manufactured from coal, oil, natural gas, or biomass feedstocks, or from unconventional fossil sources such as kerogen.

Coal Slurries

A coal slurry is a type of fuel where finely granulated coal is suspended in water, or, much more rarely, in alcohol. Either type of slurry may be burned as a fuel.

Coal slurries were originally developed to permit the transport of coal via pipeline just is the case with petroleum. The use of slurries as fuels is relatively recent.

Slurry powered engines have been developed for both electrical generation and rail transport, but the latter application is quite rare.

Refined Liquid Fuels

This category refers to the class of liquid fuels normally derived from petroleum. They are distinguished from one another primarily in terms of the molecular weights of the hydrocarbons comprising them which in turn affect combustion properties, viscosity, rate of evaporation, etc.

When these fuels are produced from petroleum feedstocks they are subjected, in the most basic terms, to a process of distillation where the crude oil is vaporized and the vapor is allowed to rise up a distilling column. Various “fractions” of the distillate condense at different levels of the column where they are captured, with the lightest fractions condensing last, at the top of the column, and the heaviest at the bottom.

The heaviest fraction consists of dense, viscous oils that are processed into lubricants or are used to make petroleum coke, a charcoal-like substance used in various industrial processes.

The next fraction up is that constituting residual oil. Residual oil is widely used for domestic and factory heating in the U.S., and is also used in lieu of diesel to run the giant two-stroke compression ignition engines used in almost all large ships today.

Next up is diesel oil, also known as distillate fuel, used in smaller compression ignition engines—though small can mean thousands or even tens of thousands of horsepower.

Kerosene is the next fraction and is used in jet engines and turboprops as well as for illumination.

And finally we have gasoline, the mainstay of the personal transportation industry today.

All of these refined products share certain attributes. None is a single chemical compound; rather, each is comprised of many hydrocarbon compounds mixed together. Such compounds consist of olefins, paraffins, and aromatics.

The general characteristic of these hydrocarbon molecules is that they form lengthy chains or rings with the length of the strand determining the molecular weight of each molecule. Gasoline, the lightest of these fuels, contains molecules of relatively short length—three to twelve carbon atoms, to which hydrogen atoms are attached.

The precise mix of hydrocarbons determines the combustion properties of the fuel, and, interestingly, the mixtures are apt to be pretty variable in pump gasoline. Some of the variance is deliberate and represents an attempt on the part of the refiners to achieve certain performance profiles, which would encompass octane and anti-knock attributes, emissions levels, and the vaporization point of the liquid, the last of which must be seasonally adjusted to average ambient air temperatures. But the mix will also depend upon what particular crude oil stocks the refiners happen to have on hand, and what processing will be required to achieve certain weightings for individual hydrocarbons.

The composition of fuels can be considerably altered by enriching the fuel with hydrogen gas and by the process of cracking which splits up long hydrocarbon molecules. Various chemicals like tolulene may also be added to affect one performance parameter or another.

Refined liquid fuels derived from unconventional fossil resources—or from biomass, for that matter—are collectively known as synfuels, short for synthetic fuels. Synfuels, as we indicated, are already beginning to be manufactured on a fairly massive scale in Qatar, and we believe that large scale production of synfuel from coal is likely to take place in China and perhaps in the United States as well. Several technologies currently exist for converting coal and natural gas into refined liquids, including the Fischer Tropsch process, direct liquefaction with hydrogenation, and the Mobil process which utilizes a methanol intermediate. These processes are explained elsewhere on this Website.

The Future of Fossil Synfuels

The central question facing the larger alternative fuels industry is which of the three main contenders, i.e. fossil synfuels, bio synfuels, or alcohols will assume pre-eminence. One could certainly envision a state of affairs where the three co-exist, but we see that happening only if they come to occupy distinctly different market niches or if local conditions variously favor one over the others. Currently the economic case for fossil synfuel appears to be better that those of its rivals, and, moreover, production techniques are relatively well proven. On the other hand, fossil synfuels are scarcely carbon neutral, and rising concerns about the effects of rising levels of carbon dioxide could lead to governmental disincentives that could destroy fossil synfuels’ cost advantage. We do not see such disincentives appearing immediately, but the possibility that they will come eventually cannot be discounted.

The Alcohols

Alcohols are what are known as oxygenates, molecules containing oxygen atoms as well as carbon and hydrogen. These integral oxygen atoms ensure that alcohol fuels burn very cleanly, producing exhausts that are primarily carbon dioxide and water vapor.

The alcohol group includes more than a score of compounds of which only two have seen much use as fuel, namely, methanol and ethanol, the two lightest compounds, as it happens; however, heavier alcohols such as propyl alcohol or isopropanol, butyl alcohol or butanol, pentanol, hexanol, etc. may also be used for fuels as well. Both pure butanol and various heavy alcohol blends exhibit some very interesting properties, and are currently available from a number of vendors as commercial fuels or additives, albeit in very limited quantities.


Methanol has been fairly extensively used as a fuel or fuel additive in specialized vehicles such as race cars and in fleet vehicles operated by government agencies and private firms, mostly in the United States. Methanol also serves as the source for the production of MBTE (methyl butyl tertiary ether), an octane booster commonly used in gasoline. Methanol has also been used to a very limited extent as a fuel for direct methanol fuel cells and as a source of hydrogen for PEM (polymer electrolyte membrane) fuel cells (methanol is very easily reformed to produce hydrogen gas and carbon dioxide).

Methanol offers the advantages of a very high octane rating, 130 in neat form, clean burning characteristics, and relatively low cost (although since most of it is derived from natural gas, the cost has been rising sharp) and for these reasons it has won the support of a number of eminent scientists and transportation experts. Nevertheless, we see little likelihood of methanol becoming a dominant liquid fuel here in the U.S. or elsewhere.

Methanol has a number of significant liabilities, chief among them its toxicity. Methanol is easily absorbed through the skin and can damage the central nervous system. Ingestion of even small amounts of the chemical may be fatal. Moreover, methanol burns with an invisible flame and constitutes a serious fire hazard. Finally, methanol is highly corrosive and requires special storage and distribution facilities. It cannot utilize the existing infrastructure for gasoline.

Apart from its hazards, methanol has only half the energy content by volume as gasoline, necessitating much larger fuel tanks for equivalent driving ranges.

We see a dim future for MBTE, the methanol derived fuel additive, as well. MBTE is in the process of being outlawed in the U.S. due to the fact that it is not readily biodegradable and tends to contaminate ground water, and it is rapidly being replaced by ethanol. We expect it to be rejected elsewhere in the world as well.

Where we find methanol interesting is as a precursor to gasoline in the Mobil process. The Mobil synfuel process yields 85% gasoline by molecular weight from the methanol feedstock, representing an extremely high conversion efficiency, and, moreover, the resulting gasoline has an octane rating of 96 in contrast to Fischer Tropsch gasoline which is down around 40. The drawback is a high aromatic content, but that can be addressed with certain additives such as mixed alcohols and by hydro-processing of the resultant fuel.

Methanol is also used in the manufacture of biodiesel at a ratio of one part methanol by volume to nine parts vegetable oil. To date, however, that market has provided relatively little stimulus for additional methanol production.

Methanol can be produced through a number of chemical processes and from a number of feedstocks. Feedstocks include wood—hence the term wood alcohol—natural gas, certain forms of agricultural waste, and coal. Most commonly syngas serves as the intermediate for methane production but techniques have been developed for converting methane directly into methanol, allowing the use of gas from landfill to be utilized.


Ethanol is the big news today in the realm of alternative fuels and seems poised for further explosive growth over the course of the next decade. While we are fairly certain that ethanol will play a major role as a transportation fuel and as a fuel additive, we are less certain that it will ever achieve dominant status.

Ethanol is discussed extensively in the section devoted to fuels derived from biomass. In fact ethanol can be made from petroleum, natural gas, or coal as well, and the American coal industry is actively promoting the manufacture of ethanol from gasified coal. We believe, however, that almost all ethanol will be manufactured from biomass in the coming years. The following discussion mainly concerns the competitive position of ethanol in relation to fuels more closely associated with fossil fuel sources, and expands upon our stated position that ethanol is unlikely to displace refined petroleum fuels and their analogs.

To comprehend our reservations in respect to ethanol one must grasp both the promise and the problems with an ethanol based fuel regime.

The Ethanol Advantage

Ethanol’s strengths are several:

Chief among them is the fact that this alcohol has been widely used in transportation for over 100 years and is a proven performer in conventional internal combustion engines. Almost all spark ignition engines can accept up to 10% ethanol mixes with no adjustments or modifications, and designing an engine that is equally capable of using either pure gasoline or pure ethanol is relatively easy especially with modern electronic engine management systems that can automatically adjust timing and air/fuel ratios.

Ethanol is somewhat more energy dense than methanol and approximately two thirds as energy dense by volume as gasoline. This makes for an acceptable though scarcely outstanding driving range.

E-85 (85% ethanol and 15% gasoline) offers octane ratings exceeding 100. Obviously this is a major benefit.

Ethanol is somewhat corrosive, and in concentrated form attacks certain metals and plastics, but acceptable substitutes are readily available and there is little or no cost penalty associated with the use of the fuel.

Ethanol is considerably safer than gasoline. Vapor pressure is higher, so dangerous fumes are much less likely to be generated when ethanol is stored. Furthermore, ethanol is non-toxic in anything less than massive doses, and it is readily biodegradable.

Ethanol may be manufactured from a great variety of feedstocks, including grains, sugar crops, woody biomass, coal, petroleum, natural gas, and various unconventional fossil fuel sources.

Ethanol is currently produced on an industrial scale, and many of the existing production processes can easily scale upward to support far greater production volumes. Ethanol is relatively inexpensive as alternate fuels go, and further cost reductions in the manufacturing processes are likely to occur in the future.

Unlike petroleum fuels, ethanol does not require a complex refining process. It is a simple chemical and a single compound, and it is produced in a three or four stage process. And, again unlike gasoline, the product is entirely consistent.

Finally, ethanol can be and usually is derived from various forms of biomass and its production can be almost entirely carbon neutral.

Ethanol’s Drawbacks:

Against these advantages must be weighed ethanol’s shortcomings.

Ethanol is currently only cost competitive with gasoline in the tropics where a sugar cane feedstock is available locally. Neither grain ethanol nor ethanol produced with the still experimental cellulosic processes can be produced as cheaply as petroleum fuels.

Pure ethanol is not a suitable fuel for compression ignition engines, which are almost exclusively used in heavy trucks and on ships, locomotives, earth moving equipment, and other heavy forms of transport. This greatly limits the potential market for the fuel, especially in Europe.

Engines running on pure or nearly pure ethanol suffer from cold start problems due to the relatively high vaporization temperature of ethanol, and unlike gasoline, ethanol cannot be processed to alleviate such problems, though certain additives may be used for that purpose.

Ethanol is hydrophilic, in other words, it attracts water and in fact draws water vapor out of the atmosphere. This creates problems in storage and transportation. Ethanol’s corrosive properties create further problems.

Ethanol may not be cost competitive with petroleum-like synfuels, although in the absence large scale production of synfuels, and because many of the more advanced processes for producing synfuels have never been commercialized at all, the economics of synfuel production remain somewhat murky.

Finally, ethanol’s overall performance properties are arguably inferior to certain other fuels including gasoline, butanol, and blended alcohols.

New Technology to the Rescue?

Currently, companies espousing new technologies for producing ethanol from wood waste, agricultural residues, and other woody biomass are garnering a good deal of publicity, but the fact is that at present cellulosic ethanol is not cost effective, though it could be in the future with the implementation of certain process improvements and the establishment of high output industrial facilities. The first commercial plants are currently being built, but years of operation must ensue before the economics of the new processes can be fully determined.

We believe that ethanol is definitely in contention as a partial replacement fuel for conventional petroleum and as a fuel additive but that it is currently disadvantaged vis a vis petroleum-like synfuels and petroleum products derived from heavy oil. But because of the steady progress occurring in both synfuel processing and in ethanol production processes the state of the art for either technology cannot provide us with many insights as to the ultimate competitiveness of either in the years to come.


Butanol, short for butyl ethanol, is a type of alcohol having four carbon atoms and an intriguing set of properties. Most butanol manufactured today is derived from petroleum feedstocks, although the fermentation of biomass was common in the past. A number of companies are currently researching cellulosic butanol production methods, but no such technology can be said to be mature.

Butanol has roughly 80% of the energy density of gasoline and is remarkably clean burning, producing almost no emissions other than carbon dioxide and water. Unlike ethanol and methanol, it is neither corrosive nor hydrophilic, and its toxicity is low and about on a par with that of ethanol. Purportedly butanol may be used in neat form in conventional gasoline engines without any modification, though best results are achieved with gasoline-butanol blends with butanol content at approximately 30% by volume.

Butanol is sometimes used as an octane booster in racing circles, though its rating is slightly lower than that of ethanol and significantly lower than that of methanol. Currently butanol is not approved for that purpose in gasoline sold to the public. Because of its high octane rating butanol is completely unsuitable for use in compression ignition engines.

Unlike ethanol, butanol has a low boiling point and thus does not suffer from the same kind of cold start problems. In fact, a small amount of butanol in a gasoline-ethanol blend will alleviate the cold start tendency caused by the ethanol.

Butanol proponents would have one believe that it is a nearly ideal liquid fuel, and if judged solely in terms of its performance properties it would be a strong contender for the designated petroleum replacement fuel. But current pricing for industrial butanol renders it completely uncompetitive with gasoline, and while new production technologies exist that promise lower prices, they are still experimental. Investors with a yen to gamble might look at butanol and at companies with unconventional technologies for manufacturing it.

One small startup calling itself Environmental Energy, Inc. is attempting to build a pilot butanol production facility based upon the enzymatic hydrolysis of cellulosic feedstocks, and a joint venture involving DuPont and British Petroleum has begun development work on another cellulosic production process. A number of small companies already sell butanol as an octane booster for racing engines.

Nevertheless, butanol is much further away from commercialization than is ethanol and isn’t attracting comparable investment or investor interest. Such is its status at present that we don’t see it exerting a market impact unless the DuPont/British Petroleum experiment proves wildly successful, or unless someone figures how to manufacture it profitably in small batches and sell it in a niche market.

Mixed Alcohols

Mixed alcohols are blends of light and heavy alcohol in various proportions, and might include methanol, ethanol, isopropyl alcohol, butanol, pentanol, hexanol, etc. Dow Chemical did considerable research in this area in the nineteen eighties and developed a catalytic production technique whereby the various constituents of the blend could be made simultaneously by passing methanol over a suitable catalyst. Since then two startup companies, Energy Fuel, Inc., and Standard Alcohol, Inc. have been formed to exploit the technology and have hired chemists and engineers formerly employed by Dow and who were involved in the experiments. The two companies are currently advancing conflicting claims as to possession of the relevant intellectual property, and the ultimate resolution of the dispute is uncertain.

In order for mixed alcohols to have any chance of succeeding as either a primary fuel or as a fuel additive, the experimental production processes in use today will have to be demonstrated to be cost effective on an industrial scale, and that will require either or both of the independents securing substantial additional investment or a major manufacturer taking an interest in the technology.

Gaseous Fuels

Gases are already extensively used as fuels today, mainly in fleet vehicles whose users are subsidized to do so either directly or indirectly. Fossil fuel gases are currently somewhat more expensive per BTU than are fossil liquid fuels, but their low volumetric energy density is their real drawback—that and the high cost of converting conventional engines to run on them.

Gaseous fuels are used in more or less raw form with two exceptions, DME (di-methyl ether) and hydrogen. Hydrogen must be reformed from any of a number of fossil fuel feedstocks, including natural gas, petroleum coke, and coal, as well as from biomass, while DME is normally produced from methanol.

Hydrogen must be considered somewhat apart from the others due to large, diverse, and well organized advocacy movement behind it, and due to the fact that it has been positioned as a universal fuel, and indeed as the mainstay of what has variously been termed the hydrogen economy or the hydrogen-based energy regime.


Hydrogen has been hailed as the fuel of the future by many leading petroleum companies, most auto manufacturers, large segments of the environmentalist movement, countless politicians, and many of the large plant engineering companies currently serving the oil industry. Private investors have also been generous in their support, and billions of investment dollars have flowed into companies involved in hydrogen generation and storage and in hydrogen fuel cells, the favored energy conversion device for utilizing the fuel.

In truth, hydrogen has a couple of points that weigh strongly in its favor as a fuel. First, it produces no greenhouse gases or pollutants whatsoever when consumed in a fuel cell, and very low levels of emissions when burned in a properly designed internal combustion engine. Second, it may be produced from a wide range of feedstocks including water.

But the fact that hydrogen has been so little used as a fuel should be indicative of the presence of certain shortcomings.

The biggest problem is cost. Hydrogen is many more times expensive to produce than gasoline or diesel, and, when produced with purely renewable energy, the costs are staggering. Many companies claim to have developed production methods that bring the cost down to near that of petroleum, but no such technology has ever been fully validated.

Hydrogen energy conversion devices are also highly problematic.

Hydrogen fuel cells for transportation are an immature technology, and units powerful enough to be used in an automobile cost hundreds of thousands of dollars and have critically limited operating lives. Even with mass production, prices are not expected to descend to anywhere near those of internal combustion engines of equivalent power within the foreseeable future.

Hydrogen burning internal combustion engines, while feasible, present far greater design problems than conventional gasoline engines, and offer distinctly inferior fuel economy to that of fuel cells; that coupled with the difficulty of storing large quantities of hydrogen in a personal vehicle, makes the case for hydrogen ICs rather questionable.

No practical cost effective means of storing hydrogen gas in vehicles has been developed to date. Proposals have been made for reforming gasoline or methanol into hydrogen and various waste products, but reformers are costly also, and the pollutants they produce undercut the green rationale behind hydrogen.

While discussions of the hydrogen economy continues unabated in political circles and in popular journals, investment dollars are no longer flowing into hydrogen startups. The hydrogen industry itself is large and diversified, but it is now focused more on serving its traditional markets, of which the biggest is petroleum refining, rather than pursuing opportunities in transportation.

Natural Gas

Natural gas is currently used far more than any other gaseous fuel, primarily in commercial fleet vehicles and in public transportation. Natural gas powered internal combustion engines offer the desirable combination of low emissions and proven performance, but with steadily rising natural gas prices the economics of this fuel are becoming worse and worse.

If natural gas production from unconventional fields and stranded locales can be produced economically in the future, then natural gas may continue to be utilized as a motor fuel and may even increase its market share. But given the far greater demand for natural gas for electrical generation and chemical processing, we doubt that the transportation market will grow appreciably, and we believe that it is likely to shrink instead.

Liquid Petroleum Gas

Liquid petroleum gas (LPG) offers higher energy density than natural gas and similar clean burning properties. Because such gas is generally drawn from oil fields and has been subject to a similar decline as petroleum itself, we don’t see usage increasing markedly.


Syngas or synthesis gas is a mixture of hydrogen and carbon monoxide in a ratio of approximately two hydrogen molecules for every molecule of carbon monoxide. Small amounts of other gases such as methane and carbon dioxide may be present as well. Energy density is less good than that of methane, but harmful emissions are less as well.

Syngas may be produced from natural gas, coal, petroleum coke, bitumen, or biomass, but most proposals for widespread utilization of syngas for fuel favor coal.

Syngas has been very extensively used for heating and illumination in the past. The gaslights of the Victorian era used syngas as did most gas cooking ranges and gas heaters in the early twentieth century. But with the coming of cheap natural gas in the nineteen thirties, the syngas industry collapsed.

Syngas may be directly used as a motor fuel, with utility scale electrical generation being the principal application, or it may be used as a precursor for manufacturing alcohols or liquid synfuels. Coal gasification, much discussed of late, involves the conversion of powdered coal to syngas onsite, and the subsequent combustion of the gas in large turbines resembling those that run on natural gas.

We think syngas will be widely used for both synfuel manufacturing and electrical generation in the future, though the economics are marginal at best today. Production of syngas for chemical manufacturing is likely to increase greatly as well, and is already commonplace in China and India.

Currently, however, syngas can scarcely be said to be a thriving industry, and the reason it isn’t has to do with the basic cost of production. Syngas is simply more expensive than the natural gas with which it competes.

Ironically, the economics are most favorable when natural gas rather than coal is utilized as a feedstock or syngas, but with natural gas prices as elevated as they are today, coal based syngas is becoming more attractive. Eventually, we believe, coal based syngas will become cheaper than natural gas, and when that happens syngas will play a crucial role in our energy regime. But such an eventuality is years away, though perhaps only a few years.

Of course natural gas prices could stabilize, particularly if stranded natural gas resources can be cost effectively tapped and unconventional natural gas can harvested at reasonable cost, but even should that occur fairly soon, much of that natural gas is likely to be converted into syngas in order to make liquid fuels. Whatever happens, syngas will still play a crucial role in the transportation sector.

As it stands, many obstacles stand in the way of widespread utilization of syngas. The cost of gasification plants using either coal or biomass is enormous, and investors have proved hesitant in funding full commercial production as opposed to pilot projects. Proponents of biomass feedstocks for syngas production like to claim that biomass from municipal waste is essentially a free resource, but in fact the design of gasifiers and other thermal reactors which can handle landfill without extensive sorting and preprocessing is not mature, and, in any event, investors are not funding full scale commercial production projects.

We see a certain inevitability to syngas in the long run simply because we can conceive of no plausible substitute. But we believe that a protracted period of high petroleum prices will have to ensue before governments or private entities decide to make the enormous investments required to make syngas an energy mainstay.


Di-methyl ether is similar to LPG in that it changes to an easily stored liquid under moderate pressure; however, even in liquid form the energy density is considerably less than that for ordinary diesel fuel made from petroleum.

DME can be manufactured from a variety of feedstocks including coal, natural gas, petroleum coke, and biomass. Usually the processing involves the production of a methanol intermediate which is then converted into DME itself. According to a recent Princeton University study, DME from coal becomes competitive with diesel at prices of $25 per barrel for crude oil.

DME has a very high cetane rating of 60, exceeding that of petroleum-based diesel fuel and ideally suited for use in compression ignition engines. Emissions are relatively very benign, and the substitution of DME for diesel oil would eliminate almost all of the pollution problems associated with diesel engines. Engine modifications are necessary to permit the use of DME in diesel rigs, but conversions pose no serious engineering challenges.

But for all DME’s advantages it is simply not present in the liquid fuels marketplace today. Pilot programs involving fleet vehicles are taking place in East Asia, and both the Chinese and Japanese governments are investigating DME, but no one has announced plans for large scale production, nor are any vehicle or engine manufacturers introducing vehicles or power plants fueled by DME. DME is currently used mainly as a propellant in aerosol cans.

We believe that with rising petroleum prices DME is likely to emerge as a strong contender if not the fuel of choice for ships, locomotives, heavy trucks, construction equipment, and possibly military vehicles, in other words, any vehicle currently utilizing diesel fuel or residual oil. The fact that DME is low in pollutants and can be gotten from coal rather inexpensively is very much in its favor, and the only possible alternative fuel competitor, biodiesel, has such poor economics associated with it that we do not see how it can ever break out of the niche markets it currently occupies.