Friday, March 16, 2012

Oil shale is plentiful, but it's not cheap

I recently tuned passed Rush Limbaugh only stopping for a moment to hear him claim that America could get $2.50 a gallon gasoline from oil shale if only the politicians would get out of the way. He's forgetting one thing. It costs more than $2.50 per gallon to produce oil from our shale. If gas was to go down to $2.50 per gallon again on the world market, our shale production would probably just shut down and go dormant waiting until the price went back up. They aren't going to exploit our shale at a loss. We have plenty of oil, but it's the more expensive variety from oil shale.

People sometimes say we have reserves of oil comparable to the Saudis so the price should be low, but it's not liquid petroleum, its shale so it doesn't matter that we have a lot as far as the price is concerned. We can't produce it at a loss. We can "drill baby drill" and grind up that shale if we want, but we can't do it for cheap. We are producing from our shale today. People just lack patience.

Oil is not likely to get cheaper, unless something like another recession cuts demand. Society will just have to get smarter and learn to thrive in an era of oil from higher priced sources.

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