Why Are Oil Prices Already So High?

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Posted by Jeff Rubin on November 4th, 2009 under SmallerWorldTags: oil depletion, oil prices, oil supply, tar sands • 5 Comments

It’s always easier to blame supposed culprits than it is to face unpleasant facts.

Take today’s oil prices.

Consumers complain about price gouging by oil companies. Oil companies point the finger at government restrictions on drilling activity. Governments blame speculators, while the latter blame the ever-weakening US dollar.

There is certainly no shortage of blame to go around. But is there enough supply?

No one seems to want to acknowledge the inconvenient truth that conventional oil supply (i.e. the type of low-cost fuel you can afford to burn) has not grown since 2005, and may never grow again.

Of course, that doesn’t mean that the world is running out of oil. Not even close.

There are some 165 billion barrels of oil stuck in Canadian tar sands, and maybe even more in Venezuela’s tar sands. And when the global economy sucks the tar sands dry, there are billions of barrels more trapped in oil shale.

But what the world has run out of is the oil that it can afford to burn.

While oil companies are quick to hold gala press conferences to announce new field discoveries (like BP’s recent trumpeting of its Tiber discovery, over six miles below the seabed of the Gulf of Mexico), you almost never hear them disclosing how quickly their fields are actually depleting.

And yet every year, depletion robs global production of about four million barrels per day, or about five per cent of the 85 million barrels the world consumes every day.

At that rate, the world has to find no less than 20 million barrels per day of new production just so the global economy can burn the same amount of oil in 2014 as it burns today.

That’s why, in the oil business, you have to run faster to stand still. And even if global production can keep up with that treadmill, that leaves no allowance for any growth in demand.

For American motorists, it means saying goodbye to cheap Mexican oil from collapsing production at the once-huge Cantarell field, and becoming ever more dependent on synthetic oil made from Canadian tar sands.

Unfortunately, the very triple-digit oil prices that will be needed to lift that supply from the tar sands will translate into pump prices that will take millions of drivers right off the road.

Of course we’re not running out of oil. We’re just running out of the oil that we can afford to burn.

I’m Jeff Rubin, and I believe your world is about to get a whole lot smaller.

joe333

I am not sure I understand. So prices will go up for oil because although there is still a lot of oil left globally, it will become progressively more expensive to produce it? Did I get that right?
FuelTankGuy

Basically what Jeff is getting at is the cost you pay at the pump right now is not the cost of that barrel of oil but the next one to come out of the ground. If you haven't had a chhance to read his book I would highly reccomend it also try “A thousand barrels a second” by Peter Tertzakian. Both are great insights on what we are about to face and why.
http://www.nuclearhydrocarbons.com/ Jim Baird

The global inventory of spent nuclear fuel (SNF) produces the energy equivalent of close to 200 operational reactors annually and its owners are prepared to pay billions to rid themselves of this energy which is sufficient to produce North America’s total annual oil requirement from the oil sands alone.

The problems of SNF; heat, ionizing radiation and radiolysis which breaks down water into ions corrosive to fuel bundles and their containers are all facilitators of bitumen production.
Hydrogen released by the process of radiolysis and the heat generated by a repository within the oil sands would overturn the equilibrium of the system and contribute both to the in situ cracking and mobilization of the resource and the high-energy flux of spent nuclear fuel will ionize and fracture (upgrade) a portion of the long chain bitumen in the ground.

These resources can be exploited in a similar fashion to the Steam Assisted Gravity Drainage Method with SNF substituting for the steam chamber.

The sedimentary rock in which bitumen is found is ideal for radionuclide containment as demonstrated by the fact oil and gas, often under significant pressure, are found there.
Bitumen itself has unprecedented capacity to sequester radionuclides, as was noted by a recent international study, and the 80 percent of Alberta’s oil sands that lie too deep to be mined are covered by a capping shale formation that would further sequester the radionuclides.

Instead of consuming valuable and CO2 generating resources to produce these reserves the waste heat of spent nuclear fuel can and should be utilized. Using SNF in this fashion is technically indistinguishable from any other form of geothermal energy which derives its power from nuclear fission.

Producing such bounty – safely- should be sufficient inducement to overcome the NIMBY problem associated with SNF? But if not, SNF can be recovered after it has depleted the oil sands to be burned a second time, as is, without the need of expensive, hazardous and dangerous from a proliferation standpoint reprocessing, in the same CANDUs we are currently trying to offload.

Jeff the global economy can be revitalized by bringing oil prices down. You could help facilitate this.
http://www.nuclearhydrocarbons.com/ Jim Baird

The global inventory of spent nuclear fuel (SNF) produces the energy equivalent of close to 200 operational reactors annually and its owners are prepared to pay billions to rid themselves of this energy which is sufficient to produce North America’s total annual oil requirement from the oil sands alone.

The problems of SNF; heat, ionizing radiation and radiolysis which breaks down water into ions corrosive to fuel bundles and their containers are all facilitators of bitumen production.
Hydrogen released by the process of radiolysis and the heat generated by a repository within the oil sands would overturn the equilibrium of the system and contribute both to the in situ cracking and mobilization of the resource and the high-energy flux of spent nuclear fuel will ionize and fracture (upgrade) a portion of the long chain bitumen in the ground.

These resources can be exploited in a similar fashion to the Steam Assisted Gravity Drainage Method with SNF substituting for the steam chamber.

The sedimentary rock in which bitumen is found is ideal for radionuclide containment as demonstrated by the fact oil and gas, often under significant pressure, are found there.
Bitumen itself has unprecedented capacity to sequester radionuclides, as was noted by a recent international study, and the 80 percent of Alberta’s oil sands that lie too deep to be mined are covered by a capping shale formation that would further sequester the radionuclides.

Instead of consuming valuable and CO2 generating resources to produce these reserves the waste heat of spent nuclear fuel can and should be utilized. Using SNF in this fashion is technically indistinguishable from any other form of geothermal energy which derives its power from nuclear fission.

Producing such bounty – safely- should be sufficient inducement to overcome the NIMBY problem associated with SNF? But if not, SNF can be recovered after it has depleted the oil sands to be burned a second time, as is, without the need of expensive, hazardous and dangerous from a proliferation standpoint reprocessing, in the same CANDUs we are currently trying to offload.

Jeff the global economy can be revitalized by bringing oil prices down. You could help facilitate this.
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Recent Blog Post

What the leaders need to understand about Canada’s shifting economy

Why Are Oil Prices Already So High?