Posted on 10/31/2005 6:41:09 AM PST by EarthStomper
It was a tenet of the late great economist Julian Simon that we'll never run out of any commodity. That's because before we do the increasing scarcity of that resource will drive up the price and force us to adopt alternatives. For example, as firewood grew scarce people turned to coal, and as the whale oil supply dwindled 'twas petroleum that saved the whales.
Now we're told we're running out of petroleum. The "proof" is the high prices at the pump. In fact, oil cost about 50% more per barrel in 1979-80 than now when adjusted for inflation. Yet it's also true that industrializing nations like China and India are making serious demands on the world's ability to provide oil and are driving prices up. So is this the beginning of the end?
Nope. The Julian Simon effect is already occurring.
The evidence is in something called oil sands (also called oil shale), a tar-like substance that can be surface mined as coal often is. The oil is then separated from the dirt using energy from oil or natural gas extracted from the site itself to produce a tar-like goo called bitumen. It's then chemically split to produce crude as light as from a well head.
Oil sands in a single Venezuelan deposit contain an estimated 1.8 trillion barrels of petroleum, with 1.7 trillion in a single Canadian deposit. In all, about 70 countries (including the U.S.), have oil sand deposits although technology hasn't yet made them economical for exploitation. Of Canada's reserves alone, about 255 billion barrels (almost equal to the entire proved oil reserves of Saudi Arabia) is currently considered recoverable. And recovering it they are.
It appears the mining of oily sand and its conversion to petroleum began in 1735 in France, but presumably the expense of the process and the discovery of easily-recoverable oil led to its abandonment.
The Canadians got in the game when Suncor Energy produced the first barrel of crude from oily sand back in 1967. The joint Canadian-U.S. venture Syncrude has been has been doing so since 1978 and now supplies over 13% of Canada's oil needs. Oil sands as a whole provide over a third of the nation's needs, with almost all of the rest going to the U.S. Between pumped oil and oil from sands, Canada is our largest supplier of crude and refined petroleum.
It almost makes up for their inflicting William Shatner on us, eh?
Suncor's success can be measured by stock prices that have increased an incredible 400% in the past five years compared to a flat-lined Dow and a dropping Nasdaq and S&P 500.
Yet business is booming now more than ever. Suncor has just finished expanding production capacity from 225,000 barrels per day to 260,000 and plans to reach 350,000 barrels daily by 2008. On the whole, the industry expects production to triple by 2020.
Thus while mature oil wells produce less each year, oil sands companies can keep producing more -- a rather happy trend.
Driving such expansion is the obvious -- sustained high prices of petroleum -- as well as continually improving technology that keeps making it cheaper to both mine and convert oil sands.
Syncrude spent only $15.27 (U.S.) last year in total production costs to produce a single barrel of its low-sulphur "Syncrude Sweet Blend." Suncor calculates that in 2004 it spent $9.81, although spokesmen for both companies confirmed they use different accounting methods to arrive at their figures. In any case, current petroleum prices of about $60 a barrel hardly need to be sustained for Canadian companies to continue to squeeze liquid gold out of their lands with plenty of money to expand operations.
We've only scratched the surface in terms of discovering and exploiting oil sand deposits, along with deposits of oil-containing rocks called oil shale. Still the amount, however huge, is necessarily finite. By one estimate, we may only have about more 500 years of energy from oil sands at current usage rates.
Just five centuries till the spigot runs dry! Where are the doomsayers when you need them?
Whats more interesting is that the left proposes static solutions [Kyoto, et al] instead of re-investing dollars into new tech.
We'll keep the Captain if they'll take Sulu.
as the whale oil supply dwindled 'twas petroleum that saved the whales.
Funny, I thought it was Scotty and transparent aluminum that saved the whales.
That's because, to be a leftist, you have to live in a private universe where you are the only purposeful agent. Other people are not real to you; they can't be expected to rise up and solve problems on their own.
"In fact, oil cost about 50% more per barrel in 1979-80 than now when adjusted for inflation."
This is a completely bogus statement.
That fact is the more you make of something, the cheaper it should be for the unit price based on the nature of mass production yet, this is not occuring. The problem is that we are making more and charging more if not in the taxes but the burdens and, the profit demands made on the company by stockholders.
Oil prices are so volatile that it takes a lot to convince a company that it will be worth it to go after a difficult oil source.
Oil sands is NOT oil shale.
Win-Win option...use the tailings to bring NO above sea level.
Tried to buy any whale oil lately?
At any price?
As recently as the '70's it was an important anti-scuff additive for high-performance engines, but now - we HAVE in fact run out of it.
Economists, unfortunately, only think in terms of economic factors, but the world we live in is not so pure and simple.
While Suncor's process may or may not be economically feasible without government subsidies, it is absolutely silly to measure their technical success by their stock price!
Just plain silliness!
Anyone who paid attention in introductory economics knows this. Back in the late 70s and early 80s I used to laugh when liberals and the press would say things like "The day is coming when it will be announced that all the oil is gone. There will be riots at the gas stations and cars stranded all over our cities...."
Sure it is.
You're making one rather glaring omission:
At the same time production of petroleum has increased, consumption has increased enormously due to the rising purchasing power of India, China, and others.
There's another economic principle having to do with supply vs demand at work here.
bttt
We will never run out of "oil". There is enough recoverable oil in shale and oil sand to last for hundreds of years.
Oil sands are not oil shale, and this alone destroys the author's credibility.
Excellent point.
Most readily available crude oil is found in oil sands - it doesn't sit in neat little ponds underground.
Kinda makes you wonder about the accuracy of the rest of the article, doesn't it, when the author makes such a fundamental mistake?
True but all those location have their own oil in the region. The largest oil reserve known is off the coast of russia and china - the largest oil company in the world is Russian.
There is plenty of oil so supply is not limited - production is only limited by government so the price climbs due to government restrictions not, market forces.
Actually, Suncor's stocked dropped $10/share a few weeks ago.
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