During Fischer–Tropsch synthesis, O atoms are dissociated on the surface of Fe-based catalysts. However, most of the dissociated O would be removed as H2O or CO2, which results in a low atom economy. Hence, a comprehensive study of the O removal pathway as formic acid has been investigated using the combination of density functional theory (DFT) and kinetic Monte Carlo (kMC) to improve the economics of Fischer–Tropsch synthesis on Fe-based catalysts. The results show that the optimal pathway for the removal of dissociated O as formic acid is the OH pathway, of which the effective barrier energy (0.936 eV) is close to that of the CO activation pathway (0.730 eV), meaning that the removal of dissociated O as formic acid is possible. The main factor in an inability to form formic acid is the competition between the formic acid formation pathway and other oxygenated compound formation pathways (H2O, CO2, methanol-formaldehyde); the details are as follows: 1. If the CO is hydrogenated first, then the subsequent reaction would be impossible due to its high effective Gibbs barrier energy. 2. If CO reacts first with O to become CO2, it is difficult for it to be hydrogenated further to become HCOOH because of the low adsorption energy of CO2. 3. When the CO + OH pathway is considered, OH would react easily with H atoms to form H2O due to the hydrogen coverage effect. Finally, the removal of dissociated O to formic acid is proposed via improving the catalyst to increase the CO2 adsorption energy or CO coverage.