PTL, para XYLENE AND THE PRICE OF OIL.

Almost 50 Years Ago. I had the honor of working at one of the premier chemical research laboratories in the country, the DuPont Experimental Station just outside Wilmington, Delaware. My first assignment was as part of a team working on a substitute for para xylene, a starting material for Dacron, polyester fiber. The main reason a substitute was needed was the high price of para xylene. Virtually every oil company was swimming in the stuff, yet the price was deemed way too high for the existing demand. Our project was focused on para tolualdehyde (hereinafter called PTL). Our initial lab work in obtaining high yields of this compound was very promising and economic projections indicated that we could produce this material for substantially less than we were paying for para xylene. As I worked on this project, I was puzzled that DuPont allowed publication of some of our work, directly opposite to the air of secrecy that surrounded most of our research. Because of the success of the laboratory work, a pilot plant was constructed to demonstrate the feasibility of producing this material on a commercial scale. Again, press releases told the world of the success of this pilot plant operation. I was doing lab work in support of this project when one day our department manager walked into my laboratory and told me to cease all work on the project, it was being abandoned. Why? Because the price of para xylene had steadily dropped to the point that we could no longer make PTL at a price to compete with para xylene. Several years later, I worked in research for a major oil company and was told that para xylene was no longer the high profit compound that it had been before DuPont forced the price down by their PTL project. Finally, a light bulb went off and I discovered that DuPont never really wanted to make PTL, although I'm sure they would have if their hand had been forced. The main objective was to be able to buy para xylene at a much lower price. This objective was accomplished without ever making a single drop of PTL on a commercial scale.



Why Did I Tell That Story? Because I get so weary of the political arguments, one of which says that even if we did exploit all the energy resources at our disposal it would make a difference of only 2 cents per gallon of gasoline. If DuPont can force a huge drop in the price of a commodity by initiating a project to manufacture a substitute, what could the world's largest consumer of petroleum do if they convinced their suppliers that they were no longer going to be held hostage by suppliers who would do whatever they can to disrupt our way of life?



Lawmakers are Split Along Party Lines. I have always said that this is a scientific issue and shouldn't be a political one. I am doing some research on both sides of the argument and trying to be objective. One conclusion is definite. Al Gore's statement that the debate over global warming is over makes no sense. I have read arguments by very credible scientists that call into question the statement that man made carbon dioxide is responsible for global warming. I have recently read an argument that says we have experienced no global warming during the past 10 years. It's hard to get enough of the raw data to determine who is right but it is obvious that the debate is not over. Each side seems so entrenched in their opinion that it is unlikely that even the most objective of scientists, much less politicians, can ever be open minded enough to look at the data objectively.



Look At My Post of July 13. I told you that oil prices would come down, or at least stabilize. Before I brag too much, I have to tell you that I didn't have a clue when or how much. We all know that world-wide demand is falling in response to high prices. While it may rebound some, I believe the overall trend is down. I am still going to maintain some exposure to energy stocks. I don't think we need $140 per barrel oil to make some, if not most, of these companies favorably priced. I am still in high dividend stocks. I recently added Pfizer to some portfolios, including my own. At less than 10 times earnings and increasing demand from aging baby boomers, firmly entrenched health care stocks appear to be a "port in the storm."