While oil prices rise above $115/barrel industry companies are looking to alternatives. But some of the alternatives burn dirtier than oil. One of these is coal-to-oil technology. . The number one energy company in South Africa, Sasol, has been attacked by its critics for emitting huge quantities of greenhouse gasses including the particularly environmentally damaging sulfur dioxide. They say these have caused a host of respiratory problems in nearby communities. Sasol says its emissions of these pollutants are small compared to emissions by other companies' coal-burning electricity plants in the region.
To be fair, Sasol does have future plans with newer technologies which they claim will trap carbon dioxide instead of emitting it but their projection is only a 10% decrease in pollutants by 2015.
Sasol's share price has more than tripled over the past three years. Analysts estimate it earned about $2 billion in the year ended June 30, about 35 percent higher than the year before -- such a sharp rise that South African authorities are contemplating a "windfall tax" on the company.
Coal-to-oil technology dates back to the 1920s, when two German chemists, Franz Fischer and Hans Tropsch, developed a process to convert coal into a gas and then use it to make synthetic fuels. Coal-to-oil technology helped fuel the Nazi war machine, which lacked access to sufficient crude oil. International oil companies also experimented with the process but put it aside because oil was cheaper.
In South Africa, though, circumstances were perfect for exploring Coal-to-oil. There was not much oil around. There was plenty of coal and it had very limited value on the market. In 1950, the government set up Sasol as a state-owned company and authorized funding for its first project, a coal-to-liquids facility called Sasolburg in the South African countryside.
When oil prices soared in the 1970s, South African officials decided to up the ante. They lent Sasol $6 billion to build two new facilities at Secunda -- each 10 times as large as Sasolburg. The government also privatized the company, listing it on the Johannesburg Stock Exchange in 1979. (The government maintains a 23.5 percent stake).
A growing focus for Sasol is marketing its technology overseas. The company first tried to do so in the 1990s, after apartheid ended, but executives found doors slammed in their faces. Oil was trading for less than $25 a barrel at the time. "We sat in corridors waiting for meetings that never happened because they didn't even know who Sasol was," recalls Pat Davies, Sasol's chief executive.

While Sasol would charge a fee for licensing its technology, its main interest is to share ownership in the facilities once they're built because it wants a share of the long-term profits. In China, Sasol is asking for a 50 percent equity stake in the projects. A Shenhua official says negotiations are going smoothly and the company hopes to begin construction soon.
Sasol officials say they're interested in Montana and other potential sites in the U.S., provided they can find a suitable partner and receive tax or other incentives. Coal-to-oil "is coming to the United States," Gov. Schweitzer proclaims. When it does, he says, other countries "will be scrambling to protect their oil supplies -- and we'll be energy independent."
So, while Sasol is making a killing what does the average South African citizen do in order to fight back against inflation and rapidly rising gas prices? There is a solution.
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