Rise of Tar Sands and new Energy regime.

While the press has slept over the past year. the prices of oil has rather quietly risen from $60 per barrel to the current $95 per barrel. It has happened without geopolitical excuses or a catastrophic drop in specific production anywhere. It has happened because no single producer can ramp up production to take advantage of this rising demand.

This past two months, the price has been moving against the historical seasonal trends and just yesterday the projected inventory gain of 500,000 barrels turned out to be a 3,800,000 barrel deficit. Obviously everyone has accepted the fact the price of a tank of gas is going up. It is also going to be costlier to keep the house warm this winter. This should begin the first gentle wave of oil usage contraction.

I started reporting on this story back in July because all the evidence that was available strongly supported the emergence of a production crisis. It could no longer be increased to make up even for declines. It has been called global peak oil and will certainly be remembered as such. More importantly, the only government in the world that has moved forcefully in an attempt to stay ahead of the problem has been the Canadian Government, and that only because they could with the tar sand resource.

The massive long term investment cycle needed began with the first oil crisis in the late seventies. The government and its industry partners committed the huge financial resources necessary to solve the production problems. Thus while Canada's conventional production peaked at around 1,000,000 barrels per day and has since declined, the production of synthetic crude from the tar sands has moved Canadian production to a current plus 3,000,000 barrels and a projected 5,000,000 barrels of production as our likely optimum production rate.

We say optimum under current technology which uses up an unsustainable amount of natural gas. I personally think that the advent of THAI technology, now been proven out will completely change everything. This is toe and heel production which I described in an earlier post. This method also skips the massive impact on the environment of tar sand mining and hot water/surfactant separation.

The real payoff for those who do not understand the tar sands is that the real geological reserve is estimated at 1.6 trillion barrels of oil or more than the rest of the world combined. We have burned about 1 trillion barrels over the past 100 years, so 1.6 trillion barrels of new oil would tide us over very nicely into the next few decades. In addition, there is another trillion barrels of tar in Venezuela with our friend Hugo should we run out in fifty years or so. And of course there are many strat traps around the world loaded with heavy oil that was simply walked away from. Perfected THAI will access all these resources.

Yet Canada is still the only country that has had the foresight to spend the money and years to advance the necessary technology. And even if it were already possible to tap this total resource, Canada would have to achieve production levels of 50,000,000 barrels per day over the next two decades to replace the pending shortfall in global oil production let alone needed growth.

At that production level, the annual depletion will hit 18 billion barrels per year and it will take around a hundred years to clean out the tar sand reserve and perhaps another hundred years to clean out Venezuela and the other smaller reserves we know about. What I am saying is that is possible, though obviously undesirable to sustain a form of our hydrocarbon based civilization for another two centuries at least.

The real long term difficulty is that this is expensive fuel. It compares fairly directly with the expected cost structure of a wood chip sourced fuel which is vastly preferable.

Since a massive new investment in the production of transportation energy is now eminent when the other shoe drops with the rapid decline of global production, it is now that policy makers can redirect that investment energy into the reforming of the global agricultural and forest paradigm.

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