Saturday, September 10, 2005

OPEC and Oil Shale

As you may know, Colorado sits on a huge deposit of oil. The only problem is that it is all locked in shale, and has never been economically feasible to get out of the ground. Well, apparently Shell (you know, the oil company) has come up with a way to extract oil from shale that is economical at a mere $30/barrel (oil is currently going at about $60/barrel). If you're really interested in the process, follow the link; otherwise, here's the punchline:

On one small test plot about 20 feet by 35 feet, on land Shell owns, they started heating the rock in early 2004. "Product" - about one-third natural gas, two-thirds light crude - began to appear in September 2004. They turned the heaters off about a month ago, after harvesting about 1,500 barrels of oil.

While we were trying to do the math, O'Connor told us the answers. Upwards of a million barrels an acre, a billion barrels a square mile. And the oil shale formation in the Green River Basin, most of which is in Colorado, covers more than a thousand square miles - the largest fossil fuel deposits in the world.

That means zero dependence on foreign oil for the foreseeable future... with only one small catch.

OPEC, everyone's favorite monopoly, has the production capacity to drop the bottom out of the oil market for a year or so to force the shutdown of any new competition (and then, of course, lower production back to current levels once Shell is bankrupt). Do you think they really want to give up that much of the American market to domestic oil? Not likely.

So what could we do about it? However much it pains me to say this, the federal government could be useful. They could set up a contract with Shell to simply buy any excess oil that they produce (at $30/barrel or so) for the first 10-20 years and just place it in the US oil reserve. It'll come in handy eventually. This would give Shell the time to stabilize production and get economically secure before they have to cope with OPEC trying to drive them under.

I know, I know... This should be repulsive to a fiscal conservative like myself, but dependence on foreign oil, particularly in the Middle East, is something to be avoided if possible. Our military and economy is too dependent on a steady influx of oil to allow the rest of the world that much control over supply. You remember all that talk about "energy independence" recently? Here's a feasible way to do it.

(I know I owe someone a thank you for the link, but I can't remember who, so thanks mystery person!)


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