Canadian oil sands

There’s a front page article in today’s Washington Post about Canadian oil sands. I guess with OPEC meeting today and oil prices over $55/barrel, oil is suddenly a hot topic.

People who refuse to believe in the Peak Oil theory (read my Peak Oil post) often point to Canadian oil sands as an example of how we will never run out of oil. But if you read the Post article, there is nothing especially comforting there. Current oil sands production is “about 1 million barrels a day,” and production is expected to triple by the year 2020. An extra 2 million barrels a day brought online gradually over a period of 20 years is not going to make a very significant change in world oil production.

According to the EIA, “worldwide oil demand is projected to reach 121 million barrels per day by 2025, requiring an increment to world production capacity of about 44 million barrels per day over current levels.” Obviously the 44 million barrels are not going to come from Canadian oil sands. In fact, if certain Peak Oil experts are to be believed, there is little chance that the world will ever be able to produce 121 million barrels per day.

Comments

[Michael A. Clem]

But the point is that price is determined by both supply and demand, and both factors are always changing. You don't have to believe in Peak Oil Theory to believe that there is a finite supply of oil. As the supply of oil decreases, this will affect not only the price, but in turn will also affect demand. Worldwide demand will undoubtably be different at $100/barrel than at $40/barrel.

[Michael H.]

Hi Half Sigma
I am surprised that the world demand for oil is only expected to increase by 50% over the next 20 years. With all those billions of people in India and China driving cars, the demand for oil could just take off in next twenty years. This could cause a huge increase in the price of oil and then a rapid switch to alterative energy sources. I think the next twenty years might be interesting for energy sector.