Oil Change International

Exposing the true costs of fossil fuels

Tar Sands Challenges

Here are some of the factors driving the industry to support tar sands oil.

  • It’s big. With 169 billion barrels of proven bitumen reserves, there are big profits to be made. Although tar sands is challenging to extract, high oil prices help to guarantee profits.


  • It’s cheap for refiners. Although tar sands oil is relatively expensive to extract, it sells to refiners at a discount to other oils because of its low quality. A significant proportion of U.S. refineries have bought special equipment in order to process this heavy sour crude so that they can cash in on that discount. Having made the investment they want the discounted oil and are determined to get it.

 

  • Because of fracking, natural gas, the main source of energy for extracting and processing tar sands, may remain cheap for years to come. This cushions the cost of producing transport fuel from this low quality oil. If natural gas prices remained at levels seen in 2007/8, tar sands production and processing would be far less profitable.

 

  • Many American and International oil companies are involved in both extracting and refining tar sands oil. By playing both ends of the game these oil companies – for example, Exxon, Shell, BP – are ensured profits from both extraction and refining. When oil prices go up, refiners make less and extractors make more. When tar sands oil is selling at a steep discount because of oversupply, as it does today, extractors are squeezed but refiners make a healthy profit. This has made tar sands advocates out of pretty much the entire North American oil industry. We now see the industry talking about “North American energy security” when what they really mean is “guaranteed profits for us”.

 

  • Canada (apparently) isn’t Saudi Arabia. Canada now vies for position with Saudi Arabia, Venezuela, Russia and Iraq in terms of oil reserves and production. Many Americans are won over by the idea that getting oil from Canada is better than getting it from these countries, as if that is the only choice available.