June 01, 2007
Naomi Klein on Canadian Oil
Absolutely amazing this piece by Naomi Klein. She's managed to grasp two basic economic points:
This isn't the boom in Iraq sparked by the proposed new oil law - that will come later. This boom is already in full swing, and it is happening about as far away from the carnage in Baghdad as you can get, in the wilds of northern Alberta.
Yup, she's discovered that oil is a global market. You never know, next she might learn the meaning of the word "fungible". She does, sadly, rather miss a point though, in her eagerness to pin this all on the Iraq war. The oil sands were opened up once before, in the early 80s, when prices rose (in inflation adjusted terms) above current ones.
Both techniques are costly: between $18 and $23 per barrel, just in expenses. Until quite recently, that made no economic sense. In the mid-80s, oil sold for $20 a barrel; in 1998-99, it was down to $12 a barrel. The major international players had no intention of paying more to get the oil than they could sell it for, which is why, when global oil reserves were calculated, the tar sands weren't even factored in. Everyone but a few heavily subsidised Canadian companies knew that the tar was staying put.
Then came the US invasion of Iraq. In March 2003, the price of oil reached $35 a barrel, raising the prospect of making a profit from the tar sands (the industry calls them "oil sands"). That year, the US Energy Information Administration "discovered" oil in the tar sands. It announced that Alberta - previously thought to have only 5bn barrels of oil - was actually sitting on at least 174bn "economically recoverable" barrels. The next year, Canada overtook Saudi Arabia as the leading provider of foreign oil to the US.
And there we have her second major enlightenment. Changes in prices and technology create resources.
You think we might manage to get her to believing in markets anytime soon, she does seem to be getting some other economic points?
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"Changes in prices and technology create resources."
And, of course, changes in resources changes prices, which changes technology.
Posted by: katie | Jun 1, 2007 9:57:40 AM
Ten years ago Venezuela was the chief provider of foreign oil to the United States. The price of gas there is currently about 29 U.S. cents per gallon. Venezuelan President Chavez has nationalized the country's oil industry. Chavez is undemocratic, and a very loud mouthed leftist.
Phoenix, AZ USA
Posted by: Charles Holden | Jun 1, 2007 9:59:06 AM
Note that Canadian oil has a very large carbon footprint: the oil itself takes a lot of energy to produce because the tar has to be heat treated.
It's akin to Ethanol, except that the raw source of energy is fossil, not renewable.
A proper carbon tax would knock the Canadian tar sands schemes on the head.
Posted by: Kay Tie | Jun 1, 2007 10:15:37 AM
Ms Klein seemed to get a lot of her piece from an article in last week's Economist. Perhaps recycling does pay.
Posted by: Will Blake | Jun 1, 2007 2:51:19 PM