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?
Unless, of course, the demand for the 'something' is increasing faster than the supply. In which case, the price should rise. Which is exactly what has happened.
JoJoba oil from a desert plant is very close oil to whale oil. I actually saw it for sale by the quart in a discount store. Turns out that oil was for sale at the discount price because the government was subsidizing it to increase production. Naturally as soon as I figured out what a quality lubricating oil it was everyone else did too. The subsidy was dropped and it is now a high priced additive for cosmetics.
"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."
You are correct sir. Actually, the real story is coal right now. since we are talking about work to draw oil from our existing resources, we don't need Canada's resources, we have trillions of barrels of oil trapped within our coal, right here in the USA. Coal will work just fine for the next 20-30 years as we move toward cleaner hydrogen. I also hate us using Arab oil when we are their biggest customer but all they do is *hit on us.
A guy from Exxon told me about their first try at squeezing oil from shale at Rifle, Colorado. They blasted the shale and crushed it to 2 inch top size, then radiated the chunks to get the oil to flow. The 2 inch golf balls swelled by 30 percent in the process. Add this to the normal 25 percent swell factor for heaped yards vs. bank yards and you have a major spoil problem, not to mention an environmental disaster to deal with.
Oil sands are not oil shale, and this alone destroys the author's credibility.
Yes it does and they also forgot to mention that light crude or sweet oil is the primary source for gasoline. Most refineries will not even buy heavy oil because they lack the cracking process to refine heavy oil. New processes have to built for heavy oil. Production of light crude world wide has decline by 2.4 millions a day since 2002.
The US should start programs on a comparable scale to the Manhattan project, to extract sand and shale oil. Even if the break even price is $15 or $20, and oil drops to that level, we should do this in the name of national security. No more blackmail or extortion by two bit dictators. No more hard currency leaving the US.
The oil isn't hurting the environment where it is now?
Anything into Oil(solution to dependence on foregn oil?)
DISCOVER Vol. 24 No. 5 ^ | May 2003 | Brad Lemley
http://www.freerepublic.com/focus/f-news/897232/posts
Bump
I'd assume it would be preprocessed at the shale oil sites to turn it into the proper form for general refining.
If the refinery has a delayed coker, this problem goes away. They can chew up the asphalt stream in the heavy crude, get a cut of gasoline, coker gas oil (distillate) and other useful, upgradable products. Three new cokers at existing refineries are coming on line in 2006.
Cokers are the key to Canadian heavies (Cold Lake, Lloydminster, etc). I noticed that three new units were coming on line besides the upgrade/expansion of existing cokers. One was at Cenex/Laurel, a small refinery, but significant when you consider its a coop and a new coker is quite expensive.
To the poster who called for a Manhattan project, I say no way. The oil biz is already the most overregulated biz there is, and the last thing the energy sector needs is more input from the lawyers in Congress, the EPA, etc. The oil companies will allocate their record profits in ways that make economic sense and are best positioned to evaluate information such as this.
Check out the latest Manhattan project to see when the WTC will get rebuilt, if you want an example of paralysis your suggestion would bring about.
Eh ?
Thanks for the post.... Sure would like to see the day when we can tell the Arabs and Chavez in Venezuela to keep their oil.
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