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What the Olympics Can Teach Us About the Price of Gas

Carl Pope, Huffington Post
This is the first Olympic Winter Games conducted on snow that was brought to the slopes by diesel trucks and helicopters — because not enough fell in British Columbia in the year of “Snowmageddon.” (Remember, it always snows somewhere — this is global warming, not District of Columbia warming.) It’s also the first Winter Olympics that has featured athletes protesting the energy policies of the host nation — i.e. Canada’s increasing emphasis on the incredibly polluting process of producing crude oil from tar sands. Olympics and NHL hockey great Mike Richter warned that “We can’t seriously combat global warming while getting fuel from the world’s dirtiest source. Unless we act now to combat climate change, it could put an end to the winters we know and love.”

… But the oil sands controversy at the Olympics is an interesting window into the increasingly complex questions of how will the world move itself around, and what really is the future of oil anyway?

Is oil a scarce geologic commodity on the verge of hitting an effective production peak, and soaring in price as a result of resulting scarcity? That’s what the founder of the Virgin Group, Sir Richard Branson, warned the UK government. He thinks the crunch will come within five years. His opinion is shared by the CEOs of at least two oil companies, Total and Petrobras, even though recent oil finds by Petrobras are often cited by peak oil skeptics as evidence that no crisis is near.

Does such an oil crunch mean that even such economically and environmentally unattractive options as cooking a lot of tar sands to make a little bit of crude oil are our future?

… To understand, let’s take a closer look at tar sands. Basically, the tar sands process involves burning huge quantities of natural gas to heat the sands and drive off the relatively tiny percentage of hydrocarbons they contain. It takes about two tons of tar sands to produce a single barrel of oil. It also takes three barrels of water. The net result is not only the release of a great deal of CO2 — five times as much as is required for conventional oil production — but also the devastation of the surface area underneath which the sands lie. Already-proposed mining projects would strip peat soils and forests from some 35 million acres of Canada’s boreal forests.

… So we are wasting huge quantities of the cleanest fossil fuel — natural gas — and what will be the world’s scarcest natural resource — clean water — to produce very expensive gasoline, while simultaneously dumping huge quantities of carbon into the atmosphere not only from burning the gas and tar sands oil but also from destroying the forests and peat soils. Basic economics suggests that this cannot make sense. But it appears to. Investors make money (sometimes). Why?

The fundamental reality that creates a market for tar sands is that global demand for oil is very inelastic.

Carl Pope is Executive Director of the Sierra Club
(23 February 2010)

Pickens expects approval of key natural gas plan

Brett Clanton, Houston Chronicle
While the U.S. may never achieve energy independence, billionaire Texas oilman T. Boone Pickens predicts Congress will pass key energy legislation by Memorial Day that can “start us back in the right direction.”

“I think Congress is ready to address the problem. The problem is we are dependent on oil from the wrong places,” he said in a meeting Thursday with the Houston Chronicle editorial board.

The legislation, known as the Natural Gas Act, would dramatically expand the use of natural gas as a transportation fuel among heavy- duty fleets. House and Senate versions of the bill provide tax breaks for natural gas-powered vehicles and fueling stations.

Pickens, 81, has been one of the most vociferous advocates of using abundant domestic natural gas supplies in the transportation sector, which accounts for most of the 21 million barrels a day of crude oil that America consumes…
(25 February 2010)

Asia buys record volume of W.African oil in Q1

Reuters India
Asian buyers are taking record volumes of West African crude oil this year as fuel consumption rises in India, China and other East Asian countries, a Reuters survey of trade sources showed on Monday.

Imports of cargoes of unrefined oil from Nigeria, Angola and other African producers via Atlantic ports averaged around 1.79 million barrels per day (bpd) in the first quarter, up from about 1.53 million bpd in the fourth quarter and close to 1.1 million bpd a year ago.

In the first three months of this year, Asia consumed about 40 percent of all the West African crude produced, up from around 25 percent in Q1 2009, the Reuters survey shows…
(1 March 2010)

Russia February Output Nears Post-Soviet Record on TNK-BP Gains

Anna Shiryaevskaya, Bloomberg
Russia crude production neared a post-Soviet record in February as TNK-BP, the venture owned by BP Plc and a group of billionaires, raised output at new fields in both western and eastern Siberia.

Crude production reached almost 10.08 million barrels a day, a gain of 3.3 percent from a year earlier and 0.2 percent from the previous month, according to preliminary data from the Energy Ministry’s CDU-TEK unit. Output, which has exceeded 10 million barrels a day for six months in a row, was slightly below November’s record.

Oil exports slumped to 5.21 million barrels a day, down 1.3 percent from January and 5.7 percent on the year, as the export tax climbed following the price of Urals, Russia’s benchmark blend.

TNK-BP boosted output to 1.42 million barrels day after ramping up new projects, such as the Uvat and Kamennoye fields in western Siberia and Verkhnechonsk in the east. Production advanced 4.5 percent from a year earlier and 0.5 percent from the previous month, not including its OAO Slavneft venture.

OAO Bashneft, controlled by Russian billionaire Vladimir Yevtushenkov’s AFK Sistema, raised output 18 percent from a year earlier to 276,600 barrels a day. That was a 3.3 percent increase from January…
(2 March 2010)

RBS accused over funding for tar sands ‘blood oil’

Sarah Arnott, The Independent
Royal Bank of Scotland (RBS) stands accused of “cashing in on blood oil” from tar sands just days after the taxpayer-owned bank was battered by the £1.3bn bonus scandal.

The bank denied the charge, maintaining that it has “very limited direct involvement” in such projects and pointing to its role as a leading arranger of finance for renewable power schemes.

Although Canada’s tar sands contain quantities of recoverable oil second only to Saudi Arabia, the extraction is highly controversial, and green groups claim it damages local habitats and boosts global climate change.

In total, UK banks have underwritten 17 per cent of all the tar sands-related deals in the last three years, according to research by groups including the World Development Movement and the think-tank Platform. RBS has underwritten the largest number of loans, accounting for more than $7.5bn (£5bn) or 7 per cent of the global total, said the report. The even greater criticism is that $2.5bn-worth of the total has taken place since the bank was bailed out with public money in October 2008.

“RBS has been involved in providing more money in loans to destructive tar sands companies than any other UK bank,” Mel Evans, from the finance and climate team at Platform, said. “When RBS executives get their bonuses, they are being rewarded for enabling oil companies to devastate traditional ways of life for indigenous communities in Canada, while making the problems of climate change much, much worse.”..

(1X February 2010)