The reason we have cheap oil is because the Middle East, notably Saudi Arabia, continues pumping it. The estimated extraction price of Saudi oil is $1-$2, with a break even price around $4 a barrel.
NO U.S. producer can compete with that. No other world producers can compete with that. Even the other adjoining countries like the United Emirates have a break even price of around $15.
It’s stupid to keep pumping oil, it is stupid to keep using petroleum energy (or even coal energy) with those basic economic facts. There is no effective competition possible.
Instead we should be using the period of low energy costs to make a more rapid transition to cheap renewables, like solar and wind. This notion of ‘all of the above’ energy sources makes no sense whatsoever. While we make such a change, we should be upgrading our energy grid, which is of poor quality and vulnerable, not to mention that we lose a tremendous amount of energy loss in distribution as pure waste, averaging 6% of generated electricity, for example.
Citypages ran a recent article on the expected loss of 20,000 jobs, by June, in the North Dakota oil fields, aka the Bakken oil fields. It’s really more like two relatively adjacent fields, the Parshal field and the Bakken field, which are part of the Bakken formation. Then there is the layer of oil below that, the Three Forks formation. There are other layers above and below the US layers, which overlap into Montana and into Saskatchewan, Canada.
For purposes of this post, we’re talking about the top layer, the Bakken layer, which is regular surface drilling, where other layers like the Three Forks are shale fields of oil. This matters because of the difference in the cost of extraction. The top layer, the Bakken, is the easiest to extract and therefore the cheapest. That production is still profitable to the Saudis, while it hurts other producers, notably here in the U.S., but also in their enemy rivals like Iran (that pesky Sunni-Shia conflict).
The break even cost of Bakken field oil is around $40 a barrel, give or take per this from Reuters, with overall U.S. break even costs running closer to $60. That’s on par with deep oil extraction off the coast of Africa. The UK remaining North Sea oil is also relatively difficult to extract, running around $50 a barrel.
Shale oil costs more than extracting oil closer to the surface; tar sands costs more than that — and has higher transportation and refining costs as well.
The North Sea oil producers are cutting an expected 300 jobs, largely due to low oil prices. And that’s for more desirable, more easily refined oil, not tar sands garbage oil.
We’re not going to see a rise in prices this year, and we’re unlikely to see prices anywhere near what it takes to make tar sands oil — with a break even price in the $70 – $80 range or higher — any time soon, if EVER. That is in part the intention of the Saudi oil producers, along with a little targeted economic war on oil speculators.
The XL is a pipeline that will do one thing, and one thing only, privatize profits (if any) and shift to the public, aka socialize liabilities, costs and losses. Only the seriously ill-informed, the chronic teabagging ignorati, and those easily deceived and exploited support this activity. This is a great opportunity as well to break the choke hold of this special interest on our politics, and get this corruption OUT NOW.
It’s not going to produce jobs; not so long as Saudi oil is coming out of the ground at $1 a barrel. Rather it is only going to perpetuate us being over that Saudi barrel if we continue this fossil fuel insanity and stupidity.