Summary
Western Canadian oilsands are a strategic resource for North America and will continue to play an important role in the overall energy equation for the next twenty years, at a minimum.
Analysis
Despite the destruction in demand for refined products in North America due to the recent economic recession, the US and Canada still have a healthy appetite for oil and will have for many years. Energy Information Administraton (EIA) projections show the demand for refined products and crude will grow slowly over the next twenty years. Declining production from conventional sources will be madeup with supply from nonconventional sources, including oilsands. When oil prices dropped to $40/bbl earlier in 2009, things indeed looked bleak for the relatively expensive crude derived from oilsands. At $80/bbl, economics are much improved and favor the expansion of production. Over the past several years, several major pipelines have been installed to bring Western Canadian crudes to US markets in Chicago, St Lous, and Cushing, OK. Transportation had been a chronic bottleneck. With the US importing 60% of its crude, the proximity of the Western Canadian fields is ideal. Many US refineries have spent significant capital adapting for Western Canadian oilsands crude. Companies such as Suncor have been working hard to improve their operation and lessen their economic impact. Recently, Suncor announced a development which would greatly reduce the acreage devoted to settling sediments from the water used in processing tar sands. The fact is there are billions of barrels of oil locked in the Western Canadian oil sands prospects. We are years from developing a reasonable alternative to gasoline and diesel, despite the promise of biofuels, hybrid automobiles, and other renewable resources.
