This Marketplace report on the OPEC summit highlights what we’ve seen revealed in the Wikileaks memo. Don’t think that just because oil prices dropped for a bit that everything’s better now. These fluctuations will continue and the overall trend will be a continued rise.
The price of crude jumped by more than $2 a barrel today. A key meeting of the Oil Producers’ Cartel — OPEC — failed to find agreement on an increase in production. The meeting in Vienna was a contentious one — and that’s putting it mildly. Now, just weeks after a consumer pullback that prompted gas prices to drop, there are fears of another sharp rise in the price of oil. Which would not bode well for any kind of global economic recovery.
But there’s an even more fundamental divide in the cartel. Between those countries like Saudi Arabia with big reserves that want a stable price for their oil, and those like Iran, Libya and Venezuela who have little spare capacity. Samuel Ciszuk is an oil analyst with IHS Global Insight.
Samuel Ciszuk: Those who are starting to see the end of their reserves are obviously interested in maximizing the amount of money they will get out of it.
That group of countries today refused to back Saudi Arabia’s call to pump more oil and restrain prices, hence the jump in the price of crude. But the Saudis hinted that they may step up production anyway. Chris Skrebowski of Peak Oil Consulting says this could herald the end of OPEC.
Chris Skrebowski: I think it’s probably a 60 or 70 percent chance that this will fundamentally change the cartel. That in practical terms, it will split.
With Saudi Arabia pumping more oil and with OPEC in disarray, that would seem to be good news for beleaguered oil consumers. But as Professor Kent Moors of Duquesne University told the Marketplace Morning Report, don’t bet on it.
Kent Moors: Well, gas prices probably have gone down as much as they’re going down nationally. We’re not going back anywhere close to $3.30 or thereabouts.
Such is the rapid growth in demand for oil — in China, India and elsewhere — the price seems headed inexorably higher.
Meanwhile, the oil sands in Canada which are touted as an alternate solution further reveal how problematic peak oil is becoming as we get closer to spending a barrel of oil to extract one:
This pipeline fight is over the most expensive oil in the world. Oil companies drilling in the Canadian oil sands typically spend $60 or more to produce one barrel of crude. It’s what’s called tough oil — it takes a lot of energy, geology, and fancy acronyms.
Drew Zieglgansberger: Probably the most advanced technology right now is called SAGD, or it stands for Steam-Assisted Gravity Drainage.
Drew Zieglgansberger is vice president at the Canadian oil firm Cenovus. We’re on a bus, touring their operations in middle-of-nowhere, Alberta. He says the world’s easy oil is gone.
Zieglgansberger: The oil now that people are looking for are not the nice light oil sitting in pools that you drill into it and it just flows by itself.
What’s left is in remote places, often way underground. As for the oil sands, they’re not even a liquid.
Zieglgansberger: It’s basically a solid matter. It’s very much like a shoe polish. It’s hard and it’s… if you put it in a cup it would be there forever. If you dump it out, it’d be like dumping some wet sand in your sandbox.
Still, processing the oil sands is worth it, ‘cause American import one hundred barrels of crude, every second. That comes out to 24,000 barrels by the time this story is over. Or one million gallons. The key ingredient to oil sands is heat: you send steam down a well, turn the sand into liquid, and pump it.
Zieglgansberger: This is basically a big, big boiler.
The steam source runs almost 3000 degrees Fahrenheit. Great big fire.
Zieglgansberger: This is where we’re burning natural gas. If you look at a normal barbecue, your barbecue is probably about 30,000 or 40,000 BTU of heat, maybe. This one generator is 250 million. It’s a massive amount of energy.
There’s the rub. In some cases, the energy put in equals what you get out.
Not worth it, says Calgary author Andrew Nikiforuk. His book is called Tar Sands.
Andrew Nikiforuk: The returns are absolutely minimal. It takes one barrel of oil or oil equivalent to get one-and-one-half barrels. Some steam plants are getting even negative returns.
Energy use makes the oil sands process emit 17 percent more greenhouse gases than normal oil — according to a U.S. government study. Critics say that makes for one of the dirtiest crudes in the world, not to mention the chemical wastewater, and clearing of forests for mining.
Canadian activist Danielle Droitsch is with the Pembina Institute.
Danielle Droitsch: It’s similar to Venezuela. It is similar to Nigerian oil. So it’s sort of the worst of the worst.
Droitsch moved to D.C. last year, in her view to keep the oil sands industry honest. She’s fighting the expansion of a pipeline carrying Canadian oil sands crude to the United States. And for now it is stalled. The application’s been at the State Department for 33 months. Opponents like Droitsch think choking off supply will help choke off oil addiction quickly. But the reality of driving suggests, maybe not.
Analyst Jim Burkhard at IHS Cambridge Energy says most of us own our cars for a decade or more. So it’ll take a long time to retire a whole generation of oil guzzlers.
Jim Burkhard: So even if we have stunning success in electric vehicles, it will take decades before we see that reduce overall global oil demand.
Read the rest of the article to find out more about the pipeline. Peak oil isn’t fake science. It’s real. Oil companies have been talking about it for a decade, but try to play it down. We have some time left, but we’re on the down-hill slope at this point.