Waking up to reality

Slowly, the reality of Peak Oil is starting to dawn on a growing number of analysts (if not the president of Shell Oil).

Case in point:  A new study by Wood MacKenzie predicts something DR readers have known for some time:  Going forward, more and more of the world's oil is going to be the sludgy hard-to-refine stuff.  The Financial Times reports:

All the worldÂ’s extra oil supply is likely to come from expensive and environmentally damaging unconventional sources within 15 years, according to a detailed study.

This will mean increasing reliance on hard-to-develop sources of energy such as the Canadian oil sands and VenezuelaÂ’s Orinoco tar belt.

A report from Wood Mackenzie, the Edinburgh-based consultancy, calculates that the world holds 3,600bn barrels of unconventional oil and gas that need a lot of energy to extract.

So far only 8 per cent of that has begun to be developed, because the world has relied on easier sources of oil and gas.

Only 15 per cent of the 3,600bn is heavy and extra-heavy oil, with the rest being even more challenging.

Matthew Simmons, investment banker to the oil industry, is quoted in the article:

“The ability to extract this heavy oil in significant volumes is still non-existent,” he said in a recent speech.

“Worse, it takes vast quantities of scarce and valuable potable water and natural gas to turn unusable oil into heavy low-quality oil.”

“In a sense, this exercise is like turning gold into lead,” Mr Simmons said.

The Daily Reckoning