Reading Edward Teller’s post on the trials and tribulations experienced by Shell Oil in its efforts to get at all that tasty delicious crude oil below the floor of the Arctic Ocean made me think of this fact: Unless you live in China, none of that oil is destined for your car’s gas tank.
One of the signs of Peak Oil is that the cheap-and-easy-to-exploit sources of cheap-and-easy-to-process petrol are all gone. The days when someone drilling a water well in his or her Texas or Pennsylvania (or Saudi, for that matter) backyard could hit a vast deposit of Extra Light Crude just waiting to be sucked up are long gone, and they’re not coming back. The majority of the oil that’s left is locked up in shale, underneath the bottom of the ocean, or (the most expensive stuff to extract and process) buried under the tundra in frozen tarry hunks that need to be mixed with natural gas just to be liquid enough to transport in a pipeline or a tanker car. And aside from what’s coming out of the Bakken and Texas, an increasing amount of it is not light enough to refine using relatively cheap conventional methods. (This is why Michele Bachmann, Sarah Palin and others are lying, deluded or both when they say that they can bring $2.00 a gallon gasoline back to the US under the “drill here, drill now, pay less” slogan. With the rising costs and complexity of oil extraction and processing, overall prices at the pump cannot go below $2.75 for any extended period if the oil companies are to turn a profit.)
The gluts of both natural gas and fracked petrol from the Bakken shale formation — which extends deep into Canada — mean that prices on the US market are far too low for any of the Arctic Ocean oil, once it’s accessed, to be currently profitable to sell on the US market. (By the way, that, more than anything, is what’s going to shut down the Keystone XL project — it costs too much just to hack the Athabascan tar out of the frozen ground and ship it to the gas-glutted US, and there are no ports on Canada’s Western shores that can handle supertankers to ship the stuff to China — and shipping it by supertanker is the cheapest way to get it to China. I expect that by the time the gas glut has dissipated in the US, the number of hybrid and straight-up electric vehicles (see also the video above, which shows the locations of electric vehicle charging stations in Saint Paul, Minnesota) will have hit a mass sufficient to send US oil demand, which has already leveled off over the past decade, on a consistently downward curve independent of whatever economic gyrations occur.)
Shell’s obviously hoping to get around the need for suitable Canadian ports by having the drilling done in the ocean and in a location nearer to Shell’s target Asian markets. But that’s going to be hard to do if incidents like the one Edward Teller describes (and again here) keep happening.