An article in BBC news online (http://www.bbc.com/future/story/20121019-turning-the-oceans-into-jetfuel/2) describes plans by the US navy to get to 50 % of its fleet powered using alternate energy fuel sources by 2020. One approach is to use seawater as a source of fuel, use an electrochemical reaction to split the oxygen and combine the CO2 in the water with hydrogen to form a liquid fuel. The benefit is elimination of the need to carry fuel on the ships and avoidance of the need for refueling ships. But the estimated price per gallon is between $3 and $ 6, as compared to conventional fuel costs of $ 3.50/gallon. How should the costs saved in carrying or transporting fuel be included in a full cost calculation to compare fuel costs ? Should Federal funding of such technologies be treated as an externality that can help development costs and thus enable the technology to become viable ? Would such energy cost reductions lower ocean shipping costs in the future and thus increase the level of global trade ?