Andrew Nikiforuk has been writing for sometime that bitumen's heyday is over. There are four reasons that account for the decline and fall of black goo:
1. There is no way to clean up bitumen spills.
Basic science shows that neither industry nor government has developed an effective spill response for conventional oil on the high seas. As a consequence, marine oil spill response remains a public relations sham that does not remove spilled oil or fully restore damaged marine ecosystems.
Because the low-grade heavy oil must be diluted with a gasoline-like product to move through a pipeline, it presents an even graver logistical challenge than a conventional spill.
2. The economic case for pipelines has totally collapsed.
Bitumen will always require higher transportation costs and more upgrading and processing due to its appalling quality. As a consequence, it has always sold at a price differential of around $6 to $7 dollars to conventional oil.
This historic differential widened when the Alberta government rubber-stamped so many projects that industry flooded the North American market with bitumen between 2000 and 2008. The differential dropped again to historic norms as more and more refineries in the U.S. retrofitted to process heavy oil.
Art Berman, a reliable Houston-based oil analyst, calculates that industry is pumping about half a million barrels a day more than what the world can burn or afford. Most of this overproduction has come from Canada, the U.S. or Iraq.
At the same time, demand is not really growing due to profound global economic stagnation — a lasting legacy of incredibly high oil prices from 2010 to 2014.
But overproduction has now depressed prices to the point that many bitumen miners and American frackers continue to pump oil solely to generate enough cash to service their increasing debt loads or keep their creditors at bay. The world economy, as Berman notes, has become a volatile casino.
“The oil industry is damaged and higher prices won’t fix it because the economy cannot bear them,” Berman adds. “It is unlikely that sustained prices will reach $70 in the next few years and possibly, ever.
3. Bitumen cannibalizes the economy.
Nearly 100 years ago, it cost but one barrel of conventional crude to find and pump another 100 barrels. Today those energy returns now average about one to 20. In the U.S., they’ve fallen to one to 10 and in the oil sands they have collapsed to one to three, or in some cases close to zero. In simple terms, bitumen doesn’t bring home the bacon.
Unfortunately, mined bitumen and fracked oil aren’t easy, cheap or carbon neutral. Companies extracting fracked oil from Texas and North Dakota typically spend four times more than what they make. Bitumen miners aren’t much better. They burn more energy and capital, and all to deliver fewer returns and surpluses to society. It’s like cycling backwards.
4. Climate disruption and carbon anarchy aren’t a distant threat... they’re here now.
Every day the science spells out some new horror: thinner Arctic ice; acidic oceans; record hot spells; flooded cities; drought-stricken crops. And every day, the economic costs grow dearer. The Fort McMurray wildfire cost $3.5 billion and was determinedly fuelled by petroleum production. The mega-flood that submerged Louisiana cost more than $8 billion and was also primed by oil extraction.
The emissions math on climate change in Canada is now pretty simple. Environment Canada states it boldly: “Emissions of GHGs from the oil and gas sector have increased 79 per cent from 107 megatonnes (Mt) in 1990 to 192 Mt CO2 in 2014. This increase is mostly attributable to the increased production of crude oil and the expansion of the oil sands industry.” Canada can’t meet any reasonable target to decrease its climate-disrupting emissions by digging up more bitumen.
The writing is on the wall. The Bitumen Boom is over.