[R-G] American Oil Supply From Canada Imperiled

[Anthony Fenton]

America With No Plan for Oil Interruption
Ironically, As Price Per Barrel Drops, American Oil Supply From Canada  
Imperiled
Edwin Black	November 3rd 2008
http://www.thecuttingedgenews.com/index.php?article=896

This continuing coverage on the oil weapon arises from the just  
released book, The Plan: How to Save America When the Oil Stops—or the  
Day Before (Dialog Press). Buy it here.

Americans may be rejoicing about lower oil prices, but the law of  
unintended consequences and the vagaries of the global oil supply have  
begun to kick in.

Ironically, oil may become dramatically scarcer for Americans--not as  
a result of manipulations by the OPEC oil cartel, but due the fragile  
economics of Canadian oil.

America consumes some 20 million barrels of oil per day, about 70  
percent of which is imported. But the number one supplier to the  
United States is close to home, our northern neighbor, Canada. The  
nation to the north sends some 2 million barrels of oil per day to the  
United States from Alberta in western Canada. This petroleum comes  
from a source commonly known as “oil sands.”

Oil sands are deposits of oily goop embedded in sand, and comprise  
about 95 percent of Canada’s massive petroleum reserve of  
approximately 180 billion barrels. That reserve was not globally  
recognized until 2003—near the time of the American invasion of Iraq.  
Prior to that, the environmentally threatening, water intensive, heavy  
industrial nature of oil sands extraction was considered too expensive  
to be considered economically viable. With oil prices telescoping  
toward $150 per barrel, the hyper-expensive oil sands process became  
viable, profitable, and the basis for a sudden American reliance on  
North American petroleum as a source of fuel.

However, many observers feel that petroleum from Canadian oil sands is  
not economically feasible when the price of a barrel sinks below $80.  
In recent days, the price of oil has crashed to below $65 per barrel.  
At press time, some spot oil markets were down to $60 per barrel. That  
cost ineffectiveness has collided with a colossal global credit  
collapse to create a perfect storm that is pausing and slowing the  
needed Canadian oil supply expansion to the United States.

Suncor Energy, a leading player in the oil sands, has already put the  
brakes on major plant upgraders and other expansion needed to satisfy  
the growing global market. For example, Suncor’s $16.2 billion  
Voyageur upgrader project, due to be completed by 2013, has now been  
postponed. Petro-Canada is likewise deferring some $10 billion worth  
of improvements scheduled for its Fort Hills enterprise. Multi-billion  
dollar cost overruns on Canadian oil projects have now become  
intolerable. In one case, a recent review of a Fort Hills oil project  
revealed a 50 percent cost overrun in a single year, costing almost  
$20 billion. . Petro-Canada CEO Ron Brenneman admitted, “We haven’t  
thought our way through what the economics might look like” with  
regard to continuing future expansion.

Among the Canadian headlines that rocked global oil circles was one in  
the Globe and Mail reading “Oil Sands Projects Slashed as Credit  
Crisis Hits Alberta” and one in Reuters, “Canada Oil Sands Slowdown  
May Halt Runaway Costs.” FirstEnergy Capital analyst, William Lacey,  
admitted, “The big guys have all suddenly drawn a line in the sand  
that wasn’t there before.”

Canadian oil supply is further complicated by a little-known reality.  
While Canada is a net oil exporter, pumping millions of barrels per  
week into the United States, it is also an importer in its eastern  
provinces of some 850,000 barrels per day from such countries as Iraq,  
Saudi Arabia, Algeria, Egypt and Venezuela as well as the United  
Kingdom, Norway and other countries, Canadians have begun to ask why  
the nation sends the vast majority of its western oil product into the  
United States while Eastern Canada must import from overseas.

If Canadian oil flows are reduced by virtue of dollar dynamics, it may  
dramatically decrease the American availability and force ever more  
reliance on a Persian Gulf supply that is now ramping down. Indeed, in  
response to the dip in global demand, the cratering world economic  
structure and the rise in the American dollar, OPEC nations have  
decreased production by some 1.5 million barrels per day and are now  
discussing further cuts. At the same time, America’s number two source  
of oil, Mexico, is beginning to cap its wells and wind down its oil  
export business, which is likely to run dry within a decade. All these  
intertwined dynamics of global oil supply only serve to emphasize the  
volatility, unpredictability and tenuousness of the fuel that  
currently propels some 98 percent of all transportation in the United  
States of America.

Edwin Black is the New York Times bestselling investigative author of  
IBM and the Holocaust, Internal Combustion and his just released book,  
The Plan: How to Save America When the Oil Stops—or the Day Before  
(Dialog Press). More information about The Plan can be found at www.planforoilcrisis.com 
.

http://www.planforoilcrisis.com/