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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: mishedlo who wrote (34888)6/27/2005 9:21:14 PM
From: J_Locke  Read Replies (1) of 110194
 
As a practical matter, it's not realistic to expect oil shale or synfuel from coal to become alternatives to crude any time soon. In the first place cost of production is very high. The recent shale project in Australia produced at about $120 a barrel; and although that was just a test run there's no reason to believe that they could have come anywhere near their $12-15 target if they had gone to larger scale production. They abandoned the project.

Second, oil shale and coal are very carbon inefficient at a time when there's obviously great concern over global warming. Although the "oil" that's produced from shale is supposedly more carbon efficient than crude, it takes huge amounts of energy (and water) to transform the shale into liquid form. And even respectable Global Warming sceptics like MIT's Richard Lindzen think that increased use of coal (the least carbon efficient fossil fuel) would be courting disaster.

Third, U.S. corporations have become almost comically risk averse. Oil companies are much more interested in stock buybacks (which support the stock option gravy train) than in risky schemes like large scale shale production. To support investment in shale projects, the U.S. Gov would probably have to guarantee a floor price for the resulting production, and that price would probably have to be greater than $60 a barrel.

The U.S. is the Saudi Arabia of oil shale (Ukraine is #2 in reserves), but those reserves won't be developed until a crisis arrives.
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