Friday, February 11, 2011

WikiLeaks Cables: Saudi Arabia Cannot Pump Enough Oil to Keep a Lid on Prices | Common Dreams

Well - leave it to WikiLeaks - but finally we have the confirmation that so many people already knew. Saudi Arabia does not the reserves that have historically been reported (for OPEC quota reasons) and they can not produce enough oil to keep prices down when demand escalates - or in other words - when the economy recovers.

Those who believe the Canadian tar sands can fill the gap are in for a big surprise. When the energy equivalent of one barrel of oil was invested into oil exploration, production, refining and shipping in Saudi Arabia it would yield more than 10 barrels of oil in return. When that same barrel of oil (energy equivalent) is invested in the Alberta tar sands it generally yields less than 3 barrels of oil in return. This reduction in the "net energy" profit margin will undoubtedly result in higher prices for oil sands production which in turn will rapidly increase the oil price for the rest of the economy.

There is another way of looking at this. The USA consumes about 22 million barrels of oil per day. Assuming the energy balance of the current Saudi Arabian fields, it requires about 2.2 million barrels of oil to find this oil, get it out of the ground, refine it and ship it to the USA. Therefore the real oil consumption for the USA has been about 24.2 million barrels per day.

In the tar sands it would take approximately 7 million barrels of oil (energy equivalent) to produce this same 22 million barrels of oil. That means the total USA demand becomes 29 million barrels per day rather than 24 million - an increase of more than 20%. In addition to this, it would require more than 100 million barrels of water per day to produce and refine this oil.

In reality, this is simply not possible. The optimistic target for the tar sands is about 5 million barrels of oil per day - and this is at the price of horrific environmental degradation. In addition to this, as energy prices climb, the cost of developing - never mind remediating - the tar sands will likely price themselves out of the market place.

Even if it were possible to produce the tar sands at this scale, the CO2 emission increases - due to the heavier nature of the crude - will increase much faster than the energy cost - and the atmosphere simply cannot tolerate that.

We simply have to find a way to move forward with less reliance on hydrocarbon resources. That is where our investments must go.

WikiLeaks Cables: Saudi Arabia Cannot Pump Enough Oil to Keep a Lid on Prices | Common Dreams

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