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It was with some surprise that I read in a recent Wall
Street Journal editorial that Engineers recently
perfected refining solid shale rock into diesel or gas,
which may amount to the largest oil supply in the world --
perhaps as much as 1.8 trillion barrels in the American
West. That's enough to meet current U.S. oil demand for
more than two centuries. Yet as late as 2007, Democrats
attached a rider to the energy bill that prohibits leasing
the federal interior lands that contain at least 80% of
America's oil shale. The key vote was cast by liberal
Senator Ken Salazar from Colorado, of all places.
Part of the surprise was learning that torture-enabling Alberto Gonzales-promoter Ken Salazar is a liberal. Another element of the surprise was the assumption that a Colorado politician would naturally support oil production from his state. Didn't the governor of Florida (a fellow named Jeb Bush back then) oppose off-shore drilling around his state a few years ago?
But most of the surprise was reading that engineers have
recently perfected
a process to refine shale oil.
Search the Internet as I might, I can't find any
announcements of new technology for extracting liquid fuels
from oil shale.
The basic knowledge has been around for more than a
century. Colorado folklore has it that some 19th-century
pioneer on the Western Slope built a log cabin and
constructed its chimney from local rock. The first fire set
the chimney itself ablaze, and thus was oil shale (the
rock that burns
) discovered.
Oil shale
is something of a misnomer, since the
sedimentary rock is not necessarily shale, and the organic
stuff in the rock isn't oil. It's a complex of hydrocarbons
called kerogen,
and if you heat it under the right
conditions, you produce something similar to crude oil,
which can then be refined into familiar stuff like gasoline
and kerosene.
In other words, this isn't something you just pump out
of the ground. It requires moving about a ton of rock for
every barrel of oil, or applying heat in the ground
(in-situ
processing).
As a GNU/Linux user, I used to get excited when I'd read
in the computer press that the coming year would be the
year of desktop Linux.
But then I got used to reading
that at the start of every year.
That's been pretty much the story of oil shale, too.
It's been the fuel of the future
for a long time,
and it's likely to stay that way for some time. Go back far
enough, when crude oil was $2 a barrel, and you'll read
that once the price gets up to $3 a barrel, shale oil will
be competitive. If crude is $10, the shale oil will work at
$15. And crude at $20, shale at $30 -- you get the
idea.
Now that crude is at $135, maybe shale oil would pay. Let's assume that you could produce it profitably for $85 a barrel. But before you start production, you've got to develop a mine with a reclamation plan, find a big water supply in a desert, then build a retorting plant and related facilities. In other words, a big up-front capital investment in the billions before you start reaping those windfall profits of $50 a barrel.
Then consider that Saudi Arabia has immense reserves of regular crude, and a production cost of about $10 a barrel. How much are you going to be willing to invest in an $85-per-barrel oil-shale plant if some feudal despot can just open his taps one morning and put you out of business with $10-per-barrel oil?
I suspect you'd put your money elsewhere. That's how markets work. That's pretty much why Exxon pulled the plug in 1982 on its $5 billion Colony Oil Shale Project in Colorado. The project made sense when prices were rising, but when oil prices fell, it was a waste of resources that could be more profitably invested elsewhere. And there's no guarantee that prices will stay high enough to insure that shale oil will be profitable.
So it really isn't fair to blame liberal Ken
Salazar.
There's plenty of oil shale in private hands,
not dependent on government leasing. Blame instead those
gutless capitalists who are reluctant, for some reason, to
invest in a bubble that could burst any morning.
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