02-04 Costs

It was so educational back in 1957 listening to lecturers at the Imperial Oil Refinery in Sarnia explaining the costs associated with exploring and producing oil, refining and marketing oil, then transporting oil by pipeline. I was a lubrication engineer in training.
A lot of time was spent discussing the production costs of bringing oil to the surface in places like Saudi Arabia, Kuwait, Iran and Iraq which had what they called “easily accessible oil”. They were talking $1 US a barrel back then.
And with crude oil prices of about $3 a barrel, the middle east was supplying the world.
Fast forward to today and middle east oil production costs are in the order of $10 US a barrel and market prices for crude oil are in the $60 US a barrel range.
The middle east still has the big advantage with US production costs per barrel on average closer to $36, Canada $41 and Russia $17. Of course, in terms of mega volumes, Russia, Saudi Arabia and the US are the big producers.
But if we are concerned about where the world is going in terms of sourcing its energy, there is no doubt in my mind that the world is going to be just as dependent on oil in the future as it is today.
There would only be a reduction in the usage of oil and gas if the three big suppliers, the US, Russia and Saudi Arabia agreed to hold back production. But this would just drive the price of oil and gas higher and make all kinds of new sources of oil and gas economical.
So, the big issue is the cost of future sources of oil and gas. And future sources are not going to be the conventional sources of crude from drilling and pumping.
Without being overly simplistic it is not unrealistic to assign a cost per barrel of oil from offshore drilling to be say $70 US a barrel. And fracking shale brings in oil at say $60 a barrel. And let’s assign oil derived from the oil sands to be in the order of $50 a barrel.
But the big story here is that the development of oil and gas from shale deposits and the tar sands are subject to technological innovations. And because of the application of technology there are shale deposits bringing oil to the surface for only $20 a barrel. And equally there are new developers of the oil sands with technology that is less hostile to the environment.
I just don’t see any solution to the warming of the atmosphere because of the burning of fossil fuels. Unless climate change creates a crisis to mankind in the order of a world war.