Clear illustration that these low quality oil are not a panacea even if there are massive deposit, their EROI is too low and then your really need a very high oil price to make it economically viable. Plus it is more and more clear that in the future they will be asked to pay for the environment damage (CO2, water an soil contamination, forest destruction) then the economy of the whole thing will an non sense.

Tar Sands have an EROI of ~ 3, Oil Shale have an EROI of 1.6 so for thos who still believe that the Green River will be the next Saoudia...

what does EROI mean again?

Great news!

http://www.eoearth.org/article/Energy_return_on_investment_(EROI)

This information is more interesting than it appears at first. Recall a few months ago Peter Robertson, vice chairman of Chevron, told lawmakers that the cost of new production in the deep water Gulf of Mexico could exceed $95 a barrel. At that time I did not believe it. I thought it was a thin excuse to justify enormous profits in the US oil industry that produce oil at an average cost far below $100 per barrel and an attempt to avoid a looming lump sum tax on the US oil industry.

However, now that they actually consider dropping oil sands in Canada because oil is down to $90 it appears much more credible that deep water oil and oil sands are indeed only profitable at $100 per barrel. This is very serious because it means oil will not drop much below $90 for very long even during a major recession because that will simply stop all new oil drilling in North America, Brazil and Europe. That will quickly lead to drops in global production of oil that will raise the price of oil back to $100 or so.

I did a little research on the issue and even countries like Saudi Arabia and Iran have made reports and announcements that their marginal cost of oil is now up to about $60 to $65 per barrel.

To be sure, this rising cost of oil production is a very dramatic development also because it is going so fast. Recall before year 2000 when oil was $20 a barrel and production was expanding meaning that the marginal cost of oil was below $20. In 2008 it appears to be at least 3 or 4 times higher. Not because we use less efficient technology but because the remaining oil is much harder to drill. In other words, we are rapidly running out of easy to drill oil even in the Middle East. It is not going to be any easier to drill in 5 years from now so the oil price is going up to the point where alternative fuels most certainly will cost less to manufacture. Whether or not we like it the times of cheap fossil fuel are irreversible over.

What is likely to happen now is the price of oil will drop as econs around the world start to falter. Its realy impossible at this point to shore the house of cards up.

In the end oil use will likely drop conciderably as many nations simply run out of money to buy any oil at all.

As long as the oil remains low, these companies will stop producing "unconventional oil", provided that the marginal is over the oil price...

The rivalry is going to increase amongst these companies, so they will become more efficient probably.

Just wait until the economy wakes up again, and the oil demand increases again.

@Treehugger:
Interesting, could you please tell me where you got the EROI values for tar sands and oil shale?

I think that some risk is always priced in when starting new projects. Moreover, because world demand is set to grow in the long term, some of these projects may still go through.

About upgraders moving south, I suspect that the transportation costs of moving bitumen are going to be high. Bitumen is viscous and pumping costs will be high. The nearest oil refinery in the States is most likely in Montana, ~750 miles away (http://tonto.eia.doe.gov/state/).

@philmcneal:

EROI is a method to arrive at energy production efficiency, i.e energy input/energy output for a give site, project of any energy medium such as oil, NG, electricity etc.

The EROI for oil has changed (decreased) a lot in the last 100 years as oil requires more and more energy to produce, transport, refine etc. Of course higher EROI translate into high $$ profits per energy unit produced.

EROI for oil was 100 in 1930, 30 in 1970, 18 to 11 in 2000 and going down soon as oil is getting more difficult to extract and refine.

EROI for Tar Sand Oil is about 4 going down to about 2 very soon due to much higher extraction cost or input energy required.

EROI for Shale Oil is about 5 going down to ?? very soon.

EROI for corn ethanol is about 1.1 to 1.6

EROI for sugar cane ethanol is about 6 but this is being questionned.

EROI for biodiesel is from 1.0 to 3.0

EROI for NG is about 10.

EROI for Coal was 80 in 1930 and down to about 30 in 1970. Highly mechanized open mines with colocated high efficiency power plants have an EROI as high as 100.

Nuclear plants had an EROI of about 15 going down to 2.5 due to much higher recent construction, maintenance and closing cost.

Hydro has an EROI of 100+

Wind turbines have and EROI of about 18

Solar has an EROI of 1.6 to about 8.0

All EROIs accuracy depend on what total energies are included as (input). The output side of the equation is much easier to arrive at.

Even an EROI on 1.0 may be acceptable when a country wants to replace essential imported oil with locally produced biofuels to reduce trade deficits, GHG and create local jobs.

I've been wondering how long it would take for this to start happening. Next, expect to hear of some companies going under, leaving environmental clean-up of their vast mess to Canadian tax payers. Hopefully it will fall completely on Albertans.

The heat from nuclear reactors can be obtained at much lower costs than electric power. This heat can be used for ethanol production or to provide the heat for oil tar extraction. High temperature reactors might even produce thermochemical hydrogen without generators. Much of the heat for hydrogen production from oil can be produced by ordinary reactors. This would be the CANDU type in Canada where the main body of the reactor is kept at room temperature and enriched Uranium is not needed.

HarveyD thank you for the good info!

haha it rocks to live in BC then because of the hydro power wee! 6.5 cents a kilowatt baby!!!! but gas here peaked at 1.50 CAD/liter, now its going down towards 1.19 even though news like this is most likely will drive the price past the 1.50 a liter mentally point.