The U.S. Has A Lot Of Shale-Oil. So?

Quite a few rightwing commentators are making waves today about a Government Accountability Office statement which says (PDF) that:

The Green River
Formation””an assemblage of over 1,000 feet of sedimentary rocks that lie beneath parts of Colorado, Utah, and Wyoming””contains the world’s largest deposits of oil shale. USGS estimates that the Green River Formation contains about 3 trillion barrels of oil, and about half of this may be recoverable, depending on available technology and economic conditions. The Rand Corporation, a nonprofit research organization, estimates that 30 to 60 percent of the oil shale in the Green River Formation can be recovered. At the midpoint of this estimate, almost half of the 3 trillion barrels of oil would be recoverable. This is an amount about equal to the entire world’s proven oil reserves.

There reactions are all along the same lines: this shale-oil reserve could “by itself supply domestic oil consumption for more than 200 years”, and “will Obama, in a possible second term, block the development of the resources that can assure America’s economic supremacy for generations?”

Typically simplistic. If only it were that easy.

Few, if any, of those conservative oil-boosters are reading further into the GAO’s report. two pages later, it mentions that there are two ways to get the oil out of the shale.

The first involves massive strip-mining to get the rock out, then heating it to 650 degrees plus to release the oil. That method has three major commercial problems: it can never get at the bulk of the reserves, which are buried under thousands of feet of non-oily rock, the cost of the power (and water to make that power) to heat the rock makes the oil it produces very expensive, and there are no roads suitable to get the equipment needed for large-scale mining into the area in days when Republicans will veto any government road-building infrastructure plans as a kneejerk reflex. These all add up to a trickle of oil at very high prices, not the economic-powerhouse gluttony rightwingers think these shale reserves represent. It also has non-commercial problems: the strip mining of vast areas of what is currently nature preserve, massive regional air and water pollution and of course the runaway effect dumping so much carbon (from burning all that oil) into the earth’s atmosphere would have on global warming that is already expected to be catastrophic. As might be expected, if the purely commercial problems aren’t going to get much of a look-in from these ideologues then environmental ones haven’t got a chance.

The second method involves drilling holes, then lowering very powerful heaters to free the oil from its shale matrix in situ and pumping the oil out. In theory, this opens up even deep-buried reserves but as the reports states, the biggest commercial problem there is that there is no proven commercially-viable way of doing this. Everything done so far has been “pilot”, “experimental”, “small scale”. best estimates say commercial technology for this method of extraction are 10-20 years away. Even then, it will mean expensive oil for the same reason strip-mining does: the cost of power needed to heat and the cost of ever-scarcer water both for power-generation and in this case for fracking. The same non-commercial problems still apply, and you can add likely massive contamination of ground water reserves that are essential for urban areas and agriculture across several states.

All of this adds up to why shale oil isn’t a pipe-dream solution to our energy woes and doesn’t mean Americans can fuel gas-guzzling SUVs for a dollar a gallon for a century to come. There’s a reason oil experts differentiate between theoretical reserves and commercially exploitable reserves. Shale oil is expensive oil and even on a purely robber-baron capitalist ethic isn’t worth squat unless other oil is just as expensive.

Luckily for the shale-oil lobby (and unluckily for Republican oil demagogues), while we may not have seen “peak oil” yet we have already passed a more telling tipping point: that of “peak cheap oil.

The International Monetary Fund (IMF) has been warned by its internal research team that there could be a permanent doubling of oil prices in the coming decade with profound implications for global trade.

“This is uncharted territory for the world economy, which has never experienced such prices for more than a few months,” the report warns.

The new IMF “working paper” come as the value of crude on world markets remains at the historically high level of $113 a barrel and just after the International Energy Agency reported that consumption would accelerate for the rest of this year in line with a wider economic recovery.

Undertaken amid mounting concerns about “peak oil”, the IMF study does not presume that there is a constraint on how much oil can be taken out of the ground. It prefers to believe that extraction rates will depend on the price that will be able to be charged for the final product.

“While our model is not as pessimistic as the pure geological view that typically holds that binding resource constraints will lead world oil production on to an inexorable downward trend in the very near future, our prediction of small further increases in world oil production comes at the expense of a near doubling, permanently, of real oil prices over the coming decade,” argues the report, entitled The Future of Oil: Geology v Technology.

At $200+ a barrel the globalized economy is unviable. It adds more in fuel for shipping costs for cheap goods from abroad than it would cost to just produce those goods more expensively and locally. That means manufacturing comes back “onshore” but it means far higher prices all round. America may by then have a goodly stream of indigenous shale-oil on tap but won’t be able to afford to buy oil and ship it from abroad. America’s mighty military won’t be able to afford enough gas for its tanks and planes to adventure abroad even if it spends the whole GDP. It means the collapse of the economic and foreign policy dreams of neoliberals and neocons alike. It means everything about the world we’ve lived in since 1945 has to be rethought because none of the basic premises hold true anymore.

And over all this hangs the specter of runaway global warming.

Sorry, but any triumphalism about America’s energy supremacy in the century to come would be vastly, incredibly, misplaced.

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Steve Hynd

Most recently I was Editor in Chief of The Agonist from Feb 2012 to Feb 2013. My blogging began at Newshoggers and I’ve had the immense pleasure of working with some great writers there and around the web ever since, including at Crooks & Liars. I'm a late 40′s, Scottish ex-pat, now married to a wonderful Texan, with Honours in Philosophy from Univ. of Stirling, UK 1986. I worked most of life in business insurance industry (fire, accident, liability) including 12 years as a broker/underwriter/correspondent at Lloyd’s of London. Being from the other side of the pond, my political interests tend to focus on how US foreign policy affects the rest of the planet. Other interests include early and dark-ages British history, literature and cognitive philosophy/science.

11 CommentsLeave a comment

  • At $200+ a barrel the globalized economy is unviable. It adds more in fuel for shipping costs for cheap goods from abroad than it would cost to just produce those goods more expensively and locally.

    The quicker we get there the better (although mining deep sea methane hydrates appear to have very good economics).

    To remind us all why:

    QUINQUIREME of Nineveh from distant Ophir,
    Rowing home to haven in sunny Palestine,
    With a cargo of ivory,
    And apes and peacocks,
    Sandalwood, cedarwood, and sweet white wine.

    Stately Spanish galleon coming from the Isthmus,
    Dipping through the Tropics by the palm-green shores,
    With a cargo of diamonds,
    Emeralds, amythysts,
    Topazes, and cinnamon, and gold moidores.

    Dirty British coaster with a salt-caked smoke stack,
    Butting through the Channel in the mad March days,
    With a cargo of Tyne coal,
    Road-rails, pig-lead,
    Firewood, iron-ware, and cheap tin trays.

    Masefield: Cargoes

  • This is a magic unicorn that just won’t die. So we have a 200 year supply of oil that no one will be able to afford. With an EROI of less than 2 it will take more energy to extract and refine it than we will get when we burn it. The Greenriver formation is located in an area that already has water shortages and it will take 5 to 10 bbls of water for each bbl of oil.

  • Back in the days of the last oil shale (Green River Formation) boom, referring to the burnable product of all that excavation and processing as shale oil made sense. But nowadays we have oil recovered from tight shale formations by fracking that doesn’t require quite as much processing. And that’s today’s shale oil.

    I’m not sure what you’d call the oil from Green River oil shale, but I’ll bet Steve can think of some words!

  • it will pollute the water table. That’s aside from triggering seismic activity.
    Water Rights in the West are often separate from land ownership and must be purchased separately. Where water is so scarce, it should be ‘nationalized’ (statized?) as a public asset. The price for use in fracking could be set high or heavily taxed. That, plus prevention of pollution and reimbursement of pollution would make the ROI negative.

    It is worth remembering that the Founding Fathers were all traitors.

  • …$200 / bbl oil makes globalization non-viable economically?

    Everything around you that you call life was made up by people that were no smarter than you and you can change it, you can influence it, you can build your own things that other people can use.” ~ Steve Jobs

  • We have an unlimited supply of energy right at our fingertips that won’t cost $200 a barrel for it to be a viable alternative.

    It’s called “renewables.”

    Funny you don’t seem to want to pursue that…

  • Primarily Jeff Rubin, former head economist at CIBC World Markets. Reported here. Also implied and inferred by the Hirsch Report (PDF Summary) and many others (e.g. here, and here (PDF)). I’d regard it as a pretty uncontroversial assertion that above a certain point – somewhere over $130+ a barrel but certainly by $200 a barrel – higher costs make the current globalized model prohibitively expensive.

  • I knew I’d read a report that specifically mentioned $200. here it is, from Bloomberg in 2008:

    The global economy would collapse if oil hit $200 a barrel, said the top energy analyst at Germany’s largest bank.

    “Two-hundred dollar oil would break the back of the global economy,” Deutsche Bank AG’s Chief Energy Economist Adam Sieminski said in an interview today in Tokyo. “Next step after $200 would be global recession and bad news for everybody.”

    Also see this study (PDF) by the German Army 2012.

  • …of this, but far less detailed study. I’ve only had a chance to take a quick look at what you’ve cited here as examples, but I’m not seeing anything that makes the case directly. Higher oil prices have negative impacts on global economic activity as the system is currently structured – okay, sure, no problem accepting that. This would tend to make local production of at least some things and maybe many things more economically viable – again, no problem accepting that.

    Where I run into problems is that both of the above are a lot different from saying that higher oil prices beyond a threshold value – chosen apparently on an arbitrary basis – make a distributed production regime impossible, full stop. I don’t see the evidence required to back that statement – there’s nothing telling me what percentage of costs go to transport of goods vs. production costs, no indication that the percentages vary tremendously from good to good as I would guess it has to, etc.

    It’s a damnably complicated issue to address in its specifics and the evidence marshalled commonly amounts to oil is finite and going to get more expensive. Okay, but what about mitigation and adaptation? Transport of manufactured goods and raw materials to produce them actually strikes me as one of the easier constellations of issues around the energy crunch to develop alternatives. One has the advantage of dealing with the movement of a relatively small number of powered prime movers, making it a lot more possible to transition to other power sources – this isn’t like personal automobiles or motive traction for farming where we have to transition fleets of hundreds of millions of machines. Instead, we’re looking at hundreds of thousands (and maybe not even very far into that range) – that’s a lot less intractable problem.

    Everything around you that you call life was made up by people that were no smarter than you and you can change it, you can influence it, you can build your own things that other people can use.” ~ Steve Jobs

  • The one thing that I would note is that global recession does not equal the sweeping statement that you’ve made. Would it be good? No. Would it encourage a realignment of production to be more local? Certainly. Would it guarantee that all production – or even a majority of the production currently off shored – would become local? I’m a lot less sure of that. My view is that we don’t have anywhere near enough information to make that determination.

    Everything around you that you call life was made up by people that were no smarter than you and you can change it, you can influence it, you can build your own things that other people can use.” ~ Steve Jobs

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