FedEx CEO: use of foreign (Arab) oil threatens US economy

You're obviously talking about “conventional” oil.

Let's set aside the fact that proved estimates are probably quite low (because little exploration has been done in undeveloped areas) — conventional oil isn't the only resource being left in the ground.

Canada's conventional oil reserves are about equal to those of the U.S. Our proved reserves in the oil sands are currently at least 139 billion barrels. That estimate is based on today's extraction and refining technology. The proven reserves are actually *growing* faster than extraction. The total potential reserves are over 10 times today's estimates.

The situation is similar, but even more dramatic in the U.S. Best estimates of U.S. oil-shale reserves are 800 billion barrels — recoverable at under $30.00/bbl.

I said “help matters” — not replace *all* foreign imports. Oil is fungible & highly price inelastic (in the short term, at least). A small amount of extra supply would make a huge difference in the world price. That's why OPEC is trying to *reduce* output. They know that a small reduction in supply results in a large increase in price.

However, if the U.S. wants to continue to keep it's reserves underground & help prop up the world price — Canada remains ready to sell you all the over-priced oil we can pump. We'll be able to continue doing that for hundreds of years too. (Unless BHO shuts us down — and either helps OPEC drive the world price of oil over $200/bbl; or destroys the world's economy completely.)

You've used a lot of qualitative adjectives — here's a link to a report with some actual quantitative data.

http://www.rand.org/pubs/monographs/2005/RAND_MG414.pdf

Most of the recovery would be done using in-situ retorting (i.e. pumping steam heat into a drill hole & pumping up oil). Some would be mined underground. Any open-pit mining would be subject to stringent environmental protection regulations.

The heat could come from many sources — nuclear being the best choice. Extracted bitumen could even be used as fuel for the process. Water is recyclable. “Very expensive” is a relative term. Shale oil production would be profitable with oil prices around $25 — $30/bbl. Production would help keep the world price down to around that level.

“Very expensive” is a relative term. Shale oil production would be profitable with oil prices around $25 — $30/bbl. Production would help keep the world price down to around that level.”

Thanks for the comment.

Yes, I used terms that were relative, and qualitative.
But industry articles have used similar terms. I’m not saying there isn’t a need for heavy oil, but my understanding is that the price has to be up around at least $80 barrel for extraction to be profitable.

My reference source is at the rigzone.com

http://www.rigzone.com/howitworks/heavyoil/insight.asp?i_id=288

see PDF “Heavy Oil recovery, The road ahead.”

“...heavy crude is notoriously difficult to recover, transport, and refine.”

Those could be considered qualitative terms, yes?

Here’s another article that details the expense and scaling back of oils sands projects due to low oil prices:

Testing times for Alberta’s oil sands
http://www.heavyoilinfo.com/feature_items/pe_oilsands.pdf/view

Thanks for the links to the articles.

My main point was (and remains) that there are huge reserves of heavy oil in the oil shales. IMHO, locking them up is going to prove harmful to the U.S. economy.

Determining the cost of extracting the resource is complex — you have to consider capital costs, long-run average costs, operating costs, sunk costs, etc. etc. — to say nothing of variable royalties and taxes. Suffice it to say that the oil companies (and their major investors) would look at all these factors (and more) before making any investment (or disinvestment) decisions.

While some reserves may cost $80/bbl to extract — others will be much cheaper. The report I linked to earlier mentions costs of under $30/bbl.

Oil companies want to see higher prices, before committing to a project — to give them a cushion, and to ensure a rapid pay back of start-up costs. The oil sands have similar economics — it can cost billions to begin production; but the operating costs from then on are quite low.

The oil companies may or may not have actually developed the oil shales. We won't know now, because they've been locked up by government fiat.

If the U.S. were to develop a part of the oil shales; the additional supply would help keep the world price low for a long time. Instead, under BHO, the U.S. has locked up the shales & a campaign is mounting to have the Alberta oil sands shut down.

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