Oil Spike Alternative

Fire of Liberty

While Bill O'Reilly and several Democrats in the Congress keep on dishing out their populist bromides against the major oil companies raking in record profits, they fail to realize that these record profits also opens the doors and provides them the working capital to invest into other sources of energy that were deemed too expensive before the uptick in oil. The most promising source of petroleum that has been spurred on by these record profits is what is known as Oil Sands. In a recent article over at Tech Central Station, Michael Fumento of the Hudson Institute has presented some insight into how the Canadian company Suncor Energy started the process in the mid 60's and was later perfected by Syncrude. The process of drawing petroleum out of the oil sands (oil shale) that can be found in massive quantities throughout Canada and in some 70 other countries within the world. Fumento notes that since 1978 Suncor Energy and Syncrude has been converting oil sands through an interesting process in which they surface mine the tar-like sands. After mining the sands, Suncor then uses the LNG and oil that has been produced during the mining process to separate the sand from the oil thus producing a gooey tar known as bitumen. Upon the production of bitumen, the company then converts the tar into light crude by a chemical process.

While the conversion of oil sands into light crude might sound a little complex to the everyday reader, it's actually easier and less expansive to dig up the petroleum rich sands and convert to oil rather than going through the expensive process of mapping out new petroleum fields, abiding by stringent exploration regulations and drilling oil wells in distant areas that need to be shut down due to extreme weather conditions like Katrina or the eventual drying up of conventional oil wells. Fumeto clearly lays out such reasoning in the following paragraphs. Just take a look:

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.

Though the most recent oil spike has put a dent on the pocketbooks of everyday Americans as they go to and fro to work and delivering their kids to school, it has also made the oil sands look like a great alternative and a more plentiful resource other than traditional petroleum sources. It's easy for people like O'Reilly and Senator Schumer to apply their populist measures towards the price of oil and its subsequent profits but I hardly see them promoting the expansion into cheaper alternatives like the Canadian oil sands. Thanks to people like Michael Fumento for bringing this to light.