Harper’s Folly: Canada Losing $30+ Billion/Year on Tar-Sands Oil
Oil is our most-precious commodity as fuel for the global economy. It is also becoming a scarce commodity, as global production has flattened, while global demand continues to climb relentlessly, everywhere in the world except for the dying economies of Europe and North America. It is a classic “seller’s market.”
Then we have Canada. Under the Harper regime; Canada has rapidly/recklessly ramped-up production of tar sands oil (vying with U.S. shale-oil production for the title of “world’s dirtiest oil”). In less than 20 years; tar sands production has increased by a factor of ten, from less than 200,000 barrels per day to over 2 million barrels per day (mb/d) in 2014. This amounts to annual tar sands production of roughly 750 million barrels.
Thanks to this reckless over-production; Canadian tar sands oil production has created three ultra-expensive/ultra-inefficient bottlenecks for itself:
a) Insufficient refining capacity
b) Insufficient shipping/pipeline infrastructure
c) Insufficient skilled labour
Because of (a) and (b); Canada’s tar sands oil has been sold at “discounts” of up to $40/barrel. Because of (c) and other factors;production costs for tar sands oil (which was already the world’s most-expensive) continue to soar.
Legions of workers must be flown in, housed and fed, adding to costs. Competition for labour is so fierce that some companies now subsidize mortgage payments on $600,000 houses to entice workers to stick around.
The combination of a grossly insufficient labour force, and grossly insufficient infrastructure to support this production is that while it is “the lowest priced oil in the world”, currently trading at a pathetic $36.02 per barrel, it is the most-expensive oilin the world to produce.
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