[The Practician]

Ok, So most of us are familiar with the idea that almost all alternative energy technologies and their projected costs are subsidized by oil, i.e. if the cost of oil goes up, the cost of building your wind farm goes up. (and if the EROEI of that oil goes down, the EROEI of your wind farm goes down)

What I am wondering is how much of a subsidy unconventional sources like tar sands and ultra deep get from the fields pumping the light sweet crude. When these unconventional resources are discussed, statements like "the tar sands need $90 a barrel to be profitable" are thrown around. That doesn't sound so bad; the world economy could probably handle that. All the cheap and easy oil gone, but tar sands oil "just" $90. Doesn't sound so bad, right?

You can probably see where I am going with this, and that is that I think its obvious that there needs to be lots of oil that costs much less than that to extract lying around for companies to make those claims, and that without the subsidy from the cheap and easy stuff the cost would skyrocket, and as the proportion of conventional to unconventional oil on the market continues to decrease that is what we would to see, and maybe even have seen.

So what do you guys think?

*note* I am assuming a fairy tail scenario of steady world economic growth and demand for growing supplies of Oil, not the real world where when oil gets over $130 a barrel it chokes off demand and creates economic turmoil

[AgentR11]

Its hard to make this comparison work because its hard to factor in the subsidy that cheap oil itself gets in the form of military protection of trade routes and foreign production facilities.

What would the price of oil be if Iran could safely blow up Saudi and Iraqi oil terminals and production systems?

Would that price increase further incentivize the grain->fuel conversion using coal generated electricity?

Its no simple problem, and it involves way to many what-if guesses to know.

[Serial_Worrier]

We're addicted to oil. We're like a baby at the teat!

[babystrangeloop]

Tar sands requires more resource inputs than just energy inputs and more energy inputs than simply petroleum.

Never mind the obvious ones like natural gas and clean water, it takes petrochemical solvents to thin the crude, etc.

Even if solar has better EROI (EROEI) than tar sands we want the oil because it means not having to replace our existing power-consuming infrastructure.

[Pops]

$this->bbcode_second_pass_quote('The Practician', 'Y')ou can probably see where I am going with this, and that is that I think its obvious that there needs to be lots of oil that costs much less than that to extract lying around for companies to make those claims, and that without the subsidy from the cheap and easy stuff the cost would skyrocket, and as the proportion of conventional to unconventional oil on the market continues to decrease that is what we would to see, and maybe even have seen.

[The Practician]

$this->bbcode_second_pass_quote('Pops', '')$this->bbcode_second_pass_quote('The Practician', 'Y')ou can probably see where I am going with this, and that is that I think its obvious that there needs to be lots of oil that costs much less than that to extract lying around for companies to make those claims, and that without the subsidy from the cheap and easy stuff the cost would skyrocket, and as the proportion of conventional to unconventional oil on the market continues to decrease that is what we would to see, and maybe even have seen.

[AgentR11]

Negative EROEI is perfectly fine if you are converting from non-portable to portable.

If you could develop a sure fire way to convert NG to gasoline or diesel (without relying on limiting feedstocks like grain, etc), even if you lost half the energy in the process, you'd become the richest human on the planet almost overnight.

You'd also become the most hated person on the planet by the folks that believe we can stop climate change.

[The Practician]

$this->bbcode_second_pass_quote('AgentR11', 'N')egative EROEI is perfectly fine if you are converting from non-portable to portable.

If you could develop a sure fire way to convert NG to gasoline or diesel (without relying on limiting feedstocks like grain, etc), even if you lost half the energy in the process, you'd become the richest human on the planet almost overnight.

You'd also become the most hated person on the planet by the folks that believe we can stop climate change.

[kublikhan]

You might want to check out this article Practician. It deals with "The Law of Receding Horizons" and how it applies to tar sands.

$this->bbcode_second_pass_quote('', 'F')or those who missed my previous articles on receding horizons, it is a simple concept: as the cost of energy rises, the cost of everything else made with energy (like building materials) also rises. So an energy project which was expected to be profitable when energy costs were x amount higher than today, turns out to still be uneconomical when you get there. And the tar sands of Alberta are shaping up to be the oil industry's poster child of this phenomenon. With oil well over $60 today, the low-grade sludge called kerogen that we recover from tar sand--actually more like a putty, at room temperature, which is why I refuse to use the whitewashing term "oil sands--should be highly profitable.

But paradoxically, the impending decline of global crude oil production, which is now coming clearly into view, has led to a mad rush to produce the tar sands. And this, in turn, has led to skyrocketing costs...such that now, the real "profit" in producing the tar sands seems to be in government tax breaks, not in actual profit on the resource itself. If the royalties on the tar sands were allowed to rise to anywhere near the normal levels for oil-around 40%, not 1%-the entire industry would cease to be. The profit would vanish, simple as that.

Perhaps the most paradoxical part of the tar sands receding horizons problem is the need for energy. At the current production level of about 1 mpbd, the tar sands operations consume about 4% of Canada's natural gas supply. So quadrupling production would consume fully 16% of the supply, and completely max out the gas market. Nearly all estimates for tar sands operations over the next ten years exceed the projections for available amounts of natural gas!

What we have here is arguably the most environmentally destructive activity man has ever attempted, with a compliant government, insatiable demand and an endless supply of capital turning it into "a speeding car with a gas pedal and no brakes." It sucks down critical and rapidly diminishing amounts of both natural gas and water, paying neither for its consumption of natural capital nor its environmental destruction, to the utter detriment of its host. And all to eke out maybe a 10% profit, if it turns out that the books haven't been cooked, and if the taxation structure remains a flat-out giveaway.

All of that, just to produce enough oil to offset the declining conventional oil production in the rest of Canada. Maybe. And that, my friends, is what I call the oil junkie's last fix. An act of sheer desperation to stave off just a little longer that inevitable day when we are forced to realize that the fossil fuel game is truly over. No more rabbits in the hat. Done.

In the July 2006 issue of Rolling Stone, Al Gore called the tar sands "crazy," a huge waste of energy and an eyesore on the landscape of Western Canada. "For every barrel of oil they extract there, they have to use enough natural gas to heat a family's home for four days," Mr. Gore told the magazine. "And they have to tear up four tons of landscape, all for one barrel of oil. It is truly nuts. But you know, junkies find veins in their toes. It seems reasonable, to them, because they've lost sight of the rest of their lives."

[The Practician]

$this->bbcode_second_pass_quote('kublikhan', 'Y')ou might want to check out this article Practician. It deals with "The Law of Receding Horizons" and how it applies to tar sands.
Tar Sands: The Oil Junkie's Last Fix, Part 1
Tar Sands: The Oil Junkie's Last Fix, Part 2

[Pops]

$this->bbcode_second_pass_quote('The Practician', 'I') am going to have to take issue with your EROEI math, however.

[kublikhan]

In addition to the "The Law of Receding Horizons", you also might want to check out embodied energy. Here's a few links discussing the embodied energy in wind turbines, how long it takes to recoup that energy, how rising oil costs are affecting turbine manufacturers, etc.

$this->bbcode_second_pass_quote('', 'W')ind turbines, used to generate non-fossil fuel based electrical power, are typically considered to take only a number of months to produce as much energy as is required in their manufacture and operation. With a life-expectancy of upwards of 20 years, the renewable energy produced by wind turbines over their life can be many times greater than that embodied in their production.

Energy yield ratios of 21 and 23 were found for a small and large scale wind turbine, respectively. The life-cycle energy requirements were shown to be offset by the energy produced within the first 12 months of operation.

[The Practician]

$this->bbcode_second_pass_quote('Pops', '')$this->bbcode_second_pass_quote('The Practician', 'I') am going to have to take issue with your EROEI math, however.

[The Practician]

http://www.economic-undertow.com/2011/0 ... ard-place/

This is an interesting little article on that gets into the issue of "return on consumption", basically the idea that the economy is built around using cheap oil wastefully, and that "demand" will not support expensive oil. Ties into the idea that even though gassing up the hummer to go grab a sixer of brew is very inefficient in energy terms, thats how the economy works

[AgentR11]

$this->bbcode_second_pass_quote('The Practician', 'T')his is an interesting little article on that gets into the issue of "return on consumption", basically the idea that the economy is built around using cheap oil wastefully, and that "demand" will not support expensive oil. Ties into the idea that even though gassing up the hummer to go grab a sixer of brew is very inefficient in energy terms, thats how the economy works

[kublikhan]

You also might want to check out my posts in the OPEC Cuts Demand Forecast thread. They talk about the same theme of high oil prices destroying demand and economic activity.