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NOT running out of oil (any time soon)

Old 10-31-05, 10:02 AM
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NOT running out of oil (any time soon)

http://www.techcentralstation.com/103105C.html

Fill 'er Up with Oils Sands!
By Michael Fumento Published 10/31/2005

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 [I'm sure he meant to say "tar sands" here as oil shale is something different; see the second last paragraph of the article - comment by movielib]), 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?
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Old 10-31-05, 10:26 AM
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Paul Ehrlich was wrong. Julian Simon was right.
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Old 10-31-05, 10:26 AM
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but that idiot in Rolling Stone said that we are running out of oil
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Old 10-31-05, 10:29 AM
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My concern is not that we're running out of oil - my concern is the United States' very large dependency on imported oil.
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Old 10-31-05, 10:44 AM
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even if we opened ANWR and the rocky mountains to drilling, I think the oil will still have to be sent to another country to be refined
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Old 10-31-05, 10:48 AM
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Two problems with this article:

1) The move from one form of energy to another was never driven by a shortage, but rather by the increased EROEI of the "new" forms of energy. There is no "new" form of energy with a higher EROEI than oil.

2) Tar sands are great, but they are not profitable unless oil prices are much higher than historical norms (hence all of the sudden interest). Also, the oil that is produced tends to be more expensive to refine.

I am also not worried that we are going to "run out" of oil (who is saying this? Demand > supply does not equal "run out"). However, we don't need to run out to have severe problems.
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Old 10-31-05, 10:49 AM
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How does your basic greedy businessman, factor into Julian Simon's amazingly simplistic theories.

Scarcity isn't an issue as much as greed is in the 21st century.

Greed creates the higher prices, which in turn force people to find alternatives...regardless of a scarcity or not.
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Old 10-31-05, 10:52 AM
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However, we don't need to run out to have severe problems.
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Old 10-31-05, 10:53 AM
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Originally Posted by TracerBullet
Two problems with this article:

1) The move from one form of energy to another was never driven by a shortage, but rather by the increased EROEI of the "new" forms of energy. There is no "new" form of energy with a higher EROEI than oil.

2) Tar sands are great, but they are not profitable unless oil prices are much higher than historical norms (hence all of the sudden interest). Also, the oil that is produced tends to be more expensive to refine.

I am also not worried that we are going to "run out" of oil (who is saying this? Demand > supply does not equal "run out"). However, we don't need to run out to have severe problems.
Valero pioneered the refining of "sour" crude oil. I'm not an expert but supposedly most of the oil extracted in the last few decades was "sweet" crude and easy to refine because of a small number of crud. The oil being extracted now is mostly "sour" crude which is harder to refine. Even without the oil sands and tar it's going to be more expensive to refine the oil being extracred from Saudi Arabia and other traditional wells.
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Old 10-31-05, 11:24 AM
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Originally Posted by TracerBullet
2) Tar sands are great, but they are not profitable unless oil prices are much higher than historical norms (hence all of the sudden interest). Also, the oil that is produced tends to be more expensive to refine.
Not necessarily accurate. The Canadians were making money around $30 a barrel on tar sands, so they are doing quite well now. Also, there has been no big push for more effecient ways to get the tar sands because regular crude is abundant. That would change if there was a need. Same goes for oil shales, which Sell says they can make money at at $40 a barrel. So it really has more to do with needing more to give us reasons to make this more efficient.

My guess is that the Saudis will do whatever they can to push crude prices down to keep anyone from getting real serious about that.

Additionally, any article that denegrates William Shatner sucks.
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Old 10-31-05, 11:30 AM
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Originally Posted by DVD Polizei
How does your basic greedy businessman, factor into Julian Simon's amazingly simplistic theories.

Scarcity isn't an issue as much as greed is in the 21st century.

Greed creates the higher prices, which in turn force people to find alternatives...regardless of a scarcity or not.
Before the 21st century there weren't "greedy businessmen"?

"Greedy" itself is a very simplistic and misleading word. Those that simply want to make as much money honestly as they can should not be called greedy. Those who want to use force or fraud whether illegally or through hijacking the power of the state to give tham advantages over others I think can rightly be called "greedy."

If the state does its rightful job and enforces laws against force and fraud instead of using its own force to do favors for businesses, the law of supply and demand works pretty well.

Greed (if you just mean wanting to become as wealthy as you can) itself cannot create higher prices. Only scarcity, higher demand, illegal force or fraud, or government meddling can do that.

For an introduction to Julian Simon's "amazingly simplistic theories" see:

http://www.wired.com/wired/archive/5.02/ffsimon_pr.html
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Old 10-31-05, 12:15 PM
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Originally Posted by DVD Polizei
How does your basic greedy businessman, factor into Julian Simon's amazingly simplistic theories.

Scarcity isn't an issue as much as greed is in the 21st century.

Greed creates the higher prices, which in turn force people to find alternatives...regardless of a scarcity or not.
so 1)businessmen are greedy . . . damn, so much for capitalism
2)greed is a product of the 21st century . . . what about the preceding 2000 years?
3)greed, not demand or availability/scarcity, create higher prices? . . . . why oh why did I take those economics classes then?!


lemme know what you got your hands on, must be a nice trip


FYI a little knowledge of economics goes a long way
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Old 10-31-05, 12:28 PM
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Originally Posted by kvrdave
Not necessarily accurate. The Canadians were making money around $30 a barrel on tar sands, so they are doing quite well now. Also, there has been no big push for more effecient ways to get the tar sands because regular crude is abundant. That would change if there was a need. Same goes for oil shales, which Sell says they can make money at at $40 a barrel. So it really has more to do with needing more to give us reasons to make this more efficient.

My guess is that the Saudis will do whatever they can to push crude prices down to keep anyone from getting real serious about that.
$30-40 a barrel is still historically high. But you've got a problem with ramping production up, as well as the demand > supply problem.

Also, what sort of energy requirements are we looking at to get the oil from tar sands? It's a much more energy-intensive process than standard crude.

And I wouldn't bet on the Saudis being able to do much to control the price of crude. All of the evidence coming out of there suggests they're pretty much at their breaking point in terms of how much oil they can produce.
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Old 10-31-05, 12:40 PM
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Originally Posted by classicman2
My concern is not that we're running out of oil - my concern is the United States' very large dependency on imported oil.
Yup! It's fine to say that there is plenty of oil out there waiting to be extracted but, even if you assume that the extracting can keep up with the demand, nothing guarantees that oil importing nations will get what they need. China, for example, are striking up oil deals right and left. Who says they won't, at some point, choose to withdraw this oil from world markets for their own use? There will be a lot of politics involved.

Up to now, Canada's oil exports have been going to the US. But China has been stricking long term oil deals with Canada. If you are an oil importing nation, you just can't assume that you'll keep getting all the oil you need from oil exporting nations. There's just too much competition out there.
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Old 10-31-05, 12:46 PM
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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.
From the article, it clearly states the JS effect has to do with scarcity, and how it forces people to come up with alternatives.

Not true.

At least not in the way some of you would like it to appear in order to justify your economics courses.

Scarcity is not the only factor which creates high prices, which results in alternative resources for that product.

Is oil scarce? Not quite. It's the oil producers who continually adjust their outputs in order to increase their profits.

If anything, I would rather have a "true scarcity" and a "false scarcity" description.
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Old 10-31-05, 12:51 PM
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We should start finding ways to drill in Colorado.
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Old 10-31-05, 12:52 PM
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Originally Posted by TracerBullet
$30-40 a barrel is still historically high. But you've got a problem with ramping production up, as well as the demand > supply problem.

Also, what sort of energy requirements are we looking at to get the oil from tar sands? It's a much more energy-intensive process than standard crude.

And I wouldn't bet on the Saudis being able to do much to control the price of crude. All of the evidence coming out of there suggests they're pretty much at their breaking point in terms of how much oil they can produce.
However, that is $30-$40 using brand new technology (in oil shale) and technology that hasn't been pressed much (for tar sands). I believe if we needed more, the technology would develop.

The energy requirements for tar sands and oil shale is higher, so the technology to extract it has to become more efficient, but when they can make money at those prices, the energy requirement is taken into effect. Though I suppose they could be much more sensitive to electrical prices, etc. I know with the oil shales they drill several large wells in a circle and drop down huge electrical heaters, which brings the crude out of the shale which is extracted through another well. They would definately be better off with a nuke plant in the area.

And while the Saudis may only be able to produce so much, right now the news says that prices are dipping because of more crude on the market than we need. The current problem has to do with refineries in terms of capacity. And I think we probably won't get more refineries any time soon. So jobs and infrastructure will go up in other countries, and we will import it. And the economy will not be helped.
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Old 10-31-05, 06:16 PM
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Originally Posted by Myster X
We should start finding ways to drill in Colorado.
There is no price stability to begin drilling in Colorado.
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Old 10-31-05, 08:13 PM
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With Canada's recent concern's over whether or not the U.S. is willing to honor NAFTA (e.g. the Softwood lumber dispute) have come calls for closer ties with other nations interested in Canadian resources including, among others, China. Paul Martin has been actively responding to this call with intensive trade negotiations. Meanwhile, Chinese entities are buying up Canadian and even american owned oil companies operating in Canada at an increased rate. While the U.S. will probably continue to be Canada's largest trading partner (and vice versa) for a long time, U.S. protectionism is forcing Canada to expand into other markets and become less dependant on the U.S.. As for NAFTA, so far regional politics in Canada have prevented the placing of punitive tariffs on oil exports to the U.S., but don't count on that lasting forever.
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Old 11-01-05, 08:59 AM
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Originally Posted by classicman2
My concern is not that we're running out of oil - my concern is the United States' very large dependency on imported oil.
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