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Comment by urthor | Hacker News Reader

Yeah absolutely. How can this be a bust time when the oil prices are so high?

In addition to higher extraction costs: 1. Alberta oil doesn't get the $80+ price you see quoted on the news. Although the major price gap has narrowed dramatically it still sells at a significant discount due to type and location. 2. Access to refineries and market is a real... challenge (to put it mildly). There has been huge opposition to expanding pipeline transport, some of it genuine (Environment, Culture) and some of it driven by self-interest ($$$). I don't want to start this debate but the result is we're still using a lot of fossil fuels right now, so (a) it's more expensive, (b) it's increased dangerous transportation by rail and (c) it's increased reliance on imports from some pretty nasty places in the world.

The funny thing is I moved to Calgary in the early 2000's when oil was well under $50/bbl and the environment was one of unbounded optimism and potential. When oil hit the same price a few years ago on the way down the would have thought the world ended.

> The funny thing is I moved to Calgary in the early 2000's when oil was well under $50/bbl and the environment was one of unbounded optimism and potential. When oil hit the same price a few years ago on the way down the would have thought the world ended.

Because the province ran out of the easy to extract oil and had to move to bitumen extraction which requires a much higher price of oil to be profitable.

Oil sands need the price of oil to be in the area of $100+ a barrel to be profitable.

You have a source on that $100/barrel?

Last figures I saw were $30/barrel was breakeven.

$70/barrel was the last number I heard 3-4 years ago. It's likely around $100 now due to higher operational costs. It's really hard to move oil in Canada.

It has more to do, I believe, with the cost of extraction and then processing the bitumen into a form that can be transported. It is quite energy intensive to do

> energy intensive

Yes, but this means your variable input costs are proportional to your sales price.

Indeed. Its quite the economic puzzle

Those are numbers that I recall being bandied about in the press when the oil sands were being developed.

I did a search for some actual numbers and they seem to be all over the place depending on the year, the type of bitumen converters being used, the age of the facility and the actual source. Oil industry numbers were about $20 a barrel less than the numbers I was seeing from investment firms.

I suspect that the numbers I was referencing were for new facilities being built back in 2015 or so. There was a lot of talk about new facilities being put into operation but that was when the price of oil was stratospheric.

Those numbers would have been higher than older facilities or upgraded facilities.

I am no economist, but my understanding is that Alberta's oil sands must be extracted via fracking, which is expensive and only profitable when oil prices are high. That there is lots of oil available is besides the fact if it is no longer economically feasible to extract it.

This quality of the oil makes Alberta extremely sensitive to pricing shenanigans OPEC plays every once in awhile.

A couple years back when oil prices were artificially low, it was due to OPEC pricing oil well below even their cost, purely to drive other oil producers out of the game.

The above added costs as well as the challenge of getting it to refineries. Lack of pipeline capacity to the coast (particularly Texas) is a big factor too.

You are conflating a couple of things. Oil sands extraction is completely different from fracking. But, you did get the basic essence right in that oil sands extraction is quite dirty and expensive.

Fracking is actually a reasonably cheap way to extract additional oil from more conventional wells. That happens in Alberta, also.

Thank you for the clarification!

> my understanding is that Alberta's oil sands must be extracted via fracking

https://www.oilsandsmagazine.com/technical/mining/surface-mi... and https://www.oilsandsmagazine.com/technical/mining

These are large surface mines.

The economics of it have to do with the massive amount of earth moved, and the relatively low amount of oil recovered per unit volume... and the work needed to be done to restore the mine afterwards.

> restore the mine afterwards

Cue the laugh track.

Just view it from space:

https://www.google.ca/maps/@57.0798964,-111.8686816,106744m/...

It looks a right mess.

Oil prices aren't high. $150+ in 2008 was high.

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