Peak Oil is You

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Page added on May 28, 2011

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Pricey oil fuelling dirtier projects

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It has often been said that even without a price on carbon there will be a meaningful shift to renewable energy sources once global oil supply peaks.

At that point, the idea is that crude prices — along with the price of gasoline, diesel and jet fuel — will begin to shoot up, making biofuels, low-emission synthetic fuels and green electricity for transportation a better bargain and investment target over time.

It’s safe to say we’re in the “peak oil” zone, conventionally speaking. The evidence of this is that oil prices have found a near-permanent home in triple-digit territory.

So, has there been a mad rush to invest in cleaner, relatively more affordable alternatives to oil? Not really — it’s been more like a casual stroll, even though such alternatives are highly competitive with oil above $100 (U.S.) a barrel.

Instead, the big oil companies are doubling down by going after fossil fuel resources that are dirtier, harder to access and more energy-intensive to extract.

That’s what Don Roberts is observing. Roberts is vice-chairman of renewable energy investments within CIBC’s wholesale banking group. He says the big petroleum companies are making some investments in green energy, such a solar, wind and biofuels, but it’s a “drop in the bucket” compared to the money being spent on the exploration, drilling and extraction of unconventional — i.e. heavy — oil.

“The hydraulic fracturing and horizontal drilling techniques they’ve honed in the natural gas sector (are) now being taken over to the oil space,” Roberts says. “It doesn’t surprise me, given where the price of oil is. You can get a bigger return.”

The obvious example of this is the oilsands and the determination of oil companies to build the $7 billion, 3,200-kilometre Keystone XL pipeline to transport huge volumes of tarsands crude into the United States.

The high price of oil, but just as important, the low price of natural gas, explain why the oilsands are on the verge of another boom. Natural gas is the single-largest input cost for oilsands development, so when the price is below $5 per million British thermal units and the price of oil is above $100 a barrel, projects become highly profitable.

CIBC estimates that newer oilsands operations fetching $85 a barrel in the market can enjoy a rate of return as high as 25 per cent.

But the trend goes far beyond the oilsands, which in a way look tame compared to some of the other multibillion-dollar gambles being made on dirtier forms of crude. More money is flowing into oil shale development and increasingly remote and risky deep-water drilling projects, as if the BP oil spill in the Gulf of Mexico never happened. How quickly memories fade.

Until there is a meaningful price on carbon in North America and China, oil companies will continue along this path. They’ll go further, deeper and thicker. They’ll take on more financial risk and take more chances with the environment. They’ll scrape the bottom of the barrel, and they’ll make generous profits doing it.

Don’t let the sight of wind turbines and solar panels in oil-company advertisements fool you into thinking otherwise. Reality paints a very different picture.

Toronto Star

4 Comments on "Pricey oil fuelling dirtier projects"

  1. Rick on Sat, 28th May 2011 10:35 pm 

    Instead, the big oil companies are doubling down by going after fossil fuel resources that are dirtier, harder to access and more energy-intensive to extract.

    Above is what Peak Oil looks like.

  2. DC on Sun, 29th May 2011 12:33 am 

    Our entire sytem, our physical one, says, you must drive a car. To get to work, to get food, to school. To grow our food and make all the toxic crud we love so much, you need oil, and lots of it. Want to start a new company? or get a job at one, again, it will be completely dependant on oil. As long as *that* is the reality, the reality of suburbia, 30 mile commutes, big-box stores and multi-billion highway expansions, renewables will always take a back seat, no matter how affordable they are. As long as governments keep subsidizing oil, roads, and indust-ag, thus keeping its real price hidden from view, we will only stop drilling when its no longer possible to do so anymore.

  3. EOTWAWKI on Sun, 29th May 2011 12:35 am 

    While I agree with the sentiments of this article, what on earth is the accompnaying illustration? Is that a picture of burning oil rigs in the Persian Gulf during the various wars there 20 years ago??? Yes, it’s messy out there but this would hardly be representative of the gist of the article!

  4. Kenz300 on Mon, 30th May 2011 10:31 pm 

    Oil and coal will continue to double down until a cheaper source of energy comes along. Oil sands, deep water drilling, oil shale are all viable because cheaper forms of energy are not available. As the demand for natural gas goes up so will the price making dirtier oil less attractive. Wind and solar have dropped in price while oil, coal and nuclear are increasing making them more competitive. Biofuels made from algae, cellulose and waste is slowly coming to market with more pilot and demonstration projects being built out to full production plants. Electric, CNG, flex fuel, hydrogen and hybrid vehicles will become a growing part of the market. We will transition to alternative energy. The pace and pain of the transition will depend on the price of oil.

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