T Nation

Which Is It?


From an emailer to Andrew Sullivan:

Here's my question:

President Bush worked in the oil industry for years. So did his father. So did many of his close friends. He obviously knows (I hope) that if new technologies were to reduce our total oil consumption by something like 5 million barrels a day by 2025 that no one can simply choose, on a country by country basis, where that savings is going to come from.

Yet clearly this is what he implied; that the decrease would all come out of our Middle East imports. If anything, we're liable to get a greater proportion of our oil from the Middle East. Simple economics tells us that if we reduce our demand for oil imports the country that is likely to suffer most is Canada, as they have the highest costs of production. The cheapest oil comes from the Middle East.

So we're left with yet another 'lesser of two evils' conclusion here: either President Bush spent years in the oil industry (not to mention Harvard Business School) and yet failed to absorb even the most basic knowledge about that industry, or that he knows full well that what he's saying isn't true, but is willing to say it anyway if he believes it benefits him politically."


That would be a good question if all politicians didn't have their speeches written for them by professional speechwriters with little, if any, input on the part of the politician.


You're not going to believe it, but my very first-initial thought upon reading this was exactly the same. But I thought it would cause a whole shit storm about him not reading it first or something dumb like that. And in all honesty this is the first mention I've seen of it and I've watched alot of coverage from CNN to C-SPAN to HNN and FOx, and noone else has mentioned it.

It is a great and valid point though and it is worth a look into its merits.




It depends on the price of oil.

If oil stays very expensive, which is probably will, due to overall high demand, then Canada is likely to sell all it can produce at market rates.

The fact Canada would make less profit than a Middle Eastern country doesn't make it more likely to be purchased from the Middle East, because the price would be the market price.

Again, this is given high demand and very profitable market prices (as is the case now).


It seems like Canadian oil would be a lot cheaper since it doesn't have to be shipped half way around the world. Why can't Canada undercut OPEC?


Production costs I think. It's tougher to get out of the ground than the Saudi stuff.


That's a very weak argument. He reads the thing beforehand, preps for it, he knows what's in it.


Middle Eastern oil can be brought out of the ground as low as $5 a barrel in some places. Anyone that wanted to challenge OPEC would risk a race to the pricing bottom that would be nothing short of suicide.


I don't think that is possible, not for 5 dollars a barrel, 1 Caterpillar D399 generator engine will burn 1 gallon of diesel in @ 3 minutes. You cannot effectively drill a well with only one engine you need atleast 4running at all times in order for the rig to function properly. It takes an excess of 30 to 65 days to drill a well depending of the geological layout and the engineered wellsystem. You could not produce a barrel of oil for 5 dollars, when you take into consideration the diesel fuel, necessary to spud the well, ( begin the well), an average rig will use 4,500 liters of fuel in the first week, 26 liters per hour, or .43 liters per minute. Take these calculations and estimate how much fuel it will cost to drill A well 3, 000 meters at .46 meters per hour,

There's no way it can be done, the reason it is so cheap is because of the labor rates in third world countries as compared to Canada or the States. I've seen guys working the rigs in Mexico for 200 dollars every two weeks, while the Americans where being paid 478.00 perday just to watch over them and make sure they were operating correctly.

Now once you get the well drilled and it is flowing you might be able to maintain the wellhead and the pumps for five dollars a day, but it is impossible to get it going from nothing for 5 dollars a day,

Unless your Jed clampitt and your hunting for some food, you pop off a shot and up comes some bubbling crude, I don't see it happening



I summarized the truth for you. Fin.


Yes, that is the point - Arab states like Saudi Arabia are merely pumping oil from existing reserves at that price.

And, the number was $5 per barrel, not $5 per day.


None of this matters. Less than 24 hours after Georgie's speech, the Secretary of Energy came out and said, basically, "Just kidding."


WASHINGTON - One day after President Bush vowed to reduce America's dependence on Middle East oil by cutting imports from there 75 percent by 2025, his energy secretary and national economic adviser said Wednesday that the president didn't mean it literally.
What the president meant, they said in a conference call with reporters, was that alternative fuels could displace an amount of oil imports equivalent to most of what America is expected to import from the Middle East in 2025.
But America still would import oil from the Middle East, because that's where the greatest oil supplies are.

So, once again, Bush was completely nd totally full of shit.


Yes, that is the point - Arab states like Saudi Arabia are merely pumping oil from existing reserves at that price.

That sounds reasonable. The oil pretty much flows out of the ground in the middle east. It is very easy to extract.

As for Canadian Oil, it is actually a tar mixed in with sand. It is also found in the northern parts of Canada and is very labor intansive to extract and then process. The tar and sand is dumped into these huge washing machine type vessels, along with a solvent like gasoline. The mixture is heated up and spun around. The heavier particles (sand) drops out of the bottom and the oil/ gasoline mixture is recovered. It is further processed before being pumped out for refining.

There is supposed to be between 3-5X the amount of tar sands in Canada than in oil in the middle east.


I'm sorry for the mis quote, but still at 5 per barrel I still do not think it's possible unless the well is currently established.
You can get the oil from the sandstone by using perforated drillpipe, and you literaly have to wash the crude from the sand and then filter the sedimebnt from the crude after it has reached topside. They also use a process called underbalanced drilling where they fill the well with a gasoline/ diesel type mixture called invert and they use this to purge the crude from the sand flats, and limestone formations.

With the cost of shipping, security and the danger associated with drilling in the middle east I do not see where exploring our options anywhere in the North American continent wouldn't be beneficial.


How's this for 5 dollars a barrel?



It will be beneficial at least to have the last big reserves of petroleum left once the reserves in the middle east are used up.