Canadian Oil Sand Cost Rising

The cost of extracting oil from Alberta's oil sands in Canada has increased 50% and the expected production from that source has decreased 7%, according to a new government report discussed in today's Toronto Star.

The cost and production rate of the oil sands is important because it has implications for the debate about Peak Oil, the theory that the world is at or near its peak oil production rate and that an expensive and widening gap between supply and demand will result.

Opponents of that theory — including major oil companies and the analysts they employ — point to sources of oil to which technology is giving new access: oil sands, oil shale, deep-ocean deposits and the like. They say technology will make these reserves easier to exploit in the coming years, offsetting any decline in traditional reserves like those in the Middle East.

The Peak Oil analysts, however, point to the high cost, relative to traditional supplies. Yes, there may be enough oil to go around, but it will cost an awful lot more to bring to market, to refine and to burn.

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