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Keystone XL’s Window Of Profitability Closing

9:16 pm in Uncategorized by Phoenix Woman

In a recent edition of the Oil and Gas Investments Bulletin newsletter, I saw the following statement:

Canadian heavy oil actually traded under $50/barrel this week—less than half the price of Brent-priced international crude. It is by far the cheapest crude on the planet right now.

(The industry calls these discounts “differentials”—they would say “the WCS Select differential blew out to $37.50, even $38 today.” This translates into “The Canadian heavy oil benchmark price traded $38 below WTI today.”)

These low prices are from the big increases in oilsands production filling up the pipelines and the refineries in North America—despite the fact that more refineries are switching over their processes to handle more heavy crude.

In fact, fast growing oilsands production is also causing a discount for other Canadian oil producers as well.

Canadian heavy crude under $50 a barrel? The stuff costs around that much just to get it out of the ground. That’s not a profitable state of affairs for tar sands exploiters. In fact, an article from February 2012 in the Toronto Globe and Mail has this passage (bolding mine):
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News Alert for Robert Samuelson: China’s Moving Off Coal and Oil a Lot Faster Than We Are

12:20 pm in Energy by Phoenix Woman

Even as the Tar Sands Action protests at the White House are continuing, the big dogs of the Washington Post — apparently feeling that since the Sulzbergers of the New York Times have taken an anti-Athabascan-Tar-Sands position, they must do the exact opposite — sends forth one of their useful idiots, Robert Samuelson, to try and make the Keystone XL protesters go away:

If Obama rejects the pipeline, he would — perversely — increase greenhouse gas emissions. Canada has made clear that it will proceed with oil sands development regardless of the American decision. If the United States doesn’t want the oil, China and other Asian countries do. Pipelines would be built to the West Coast. Transporting the oil by tanker to Asia would almost certainly create more emissions than moving it by pipeline to closer U.S. markets.

I have two words for that: “Bull” and “Shit”.

First off, it’s very, very expensive to extract oil from tar sands, especially the increasingly-costly Athabascan Tar Sands, so much so that exploiting the Athabascan sands is only economically worthwhile if the oil is pumped through a pipeline (which is itself only possible if the molasses-consistency “oil” is first diluted with lighter oils or even water), and only if oil goes and stays above $4 a gallon at the pump throughout the US, the Keystone XL pipeline’s target market. This is not exactly a safe assumption as $4-a-gallon gas curtails economic production sufficiently to cause a slackening of demand for oil; remember how the price of gas flirted with $4 a gallon in July of 2008, only to start dropping precipitously once the 2008 crash kicked into high gear? In short, taking away the pipeline takes away the developers’ ability to make a profit off of this boondoggle.

Second off, China is, if anything, trying to get the hell off of both coal and oil as fast as it can, because it’s been made crystal-clear what’s going to happen if it keeps kicking out carbon emissions at high rates. China is also determined to use more of its own oil rather than relying on imports; its known reserves of oil and natural gas have increased markedly in recent years. Read the rest of this entry →

Toxic Mudpie Update: We Told You So

11:22 am in Uncategorized by Phoenix Woman

The major commercial networks and even PBS were apparently all too busy pushing bogus Tory/GOP talking points on the BP spill Friday night* to mention this, so it fell to a radio network, NPR, to tell us that the sand berms that Louisiana governor Bobby Jindal wants so badly a) won’t work, b) won’t last, c) are being made without any sort of oversight, much less proper scientific oversight, and d) may well make things worse (such as by choking off the wetlands) in the short time they exist before even normal wave action in the Gulf starts to wear at them:

"The structure that I see that they’re planning to build is going to erode as soon as it’s constructed, and it’s going to have a tough time making it through a hurricane season that’s predicted to be a fairly active one," [coastal geologist Rob] Young tells NPR’s Melissa Block. "I just don’t have a very high level of confidence that a project that’s going to require a lot of energy and a lot of sand and mobilize a lot of people is going to do what they promise it will do."

What’s more, says Young, there could be unintended environmental consequences.

"We don’t know how that structure will impact storm surge or waves or currents. And whether there are possibilities that it might in fact draw more wet oil through some inlets than in other areas," he says.

Of course, those of you who are regular FDL readers already know all this, because Kirk Murphy told you all about it over two weeks ago:

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