The Alberta tar sands. Canada’s oil costs more than it makes

The Alberta tar sands are one of the biggest oil reserves in the world. Yet extracting the fossil fuel costs more than the profits it’s fetching.

The Alberta tar sands hold much of Canada’s oil wealth: the region contains an estimated 1.7 trillion barrels of bitumen oil. The size of this reserve makes it the third largest oil deposit in the world after Venezuela and Saudi Arabia. Yet despite this, the cost of extraction now outweighs the profit made per barrel.


Alberta tar sands
View of the Alberta tar sands © Kris Krüg/Flickr

Pipelines blocked

These inland deposits are becoming increasingly isolated. The Northern Gateway and Kinder Morgan pipelines, originally destined for Pacific seaports in the Canadian province of British Columbia, have effectively been halted by the Canadian government due to environmental concerns. This blow to the Albertan oil industry followed the Obama administration’s rejection of the Keystone XL pipeline, designed to take the tar sand oil to refineries in the United States.


Fort McMurray

In a not so distant past the region of the Alberta tar sands, which is the size of England, and its main city, Fort McMurray, experienced an economic boom due to the opportunities created by the oil industry. People flocked there, attracted by the money that could be made. This was also due to the fact that the type of oil in the tar sands, bitumen oil, involves open pit mining and requires more labour to be extracted compared to conventional oil extraction, which occurs through drilling rigs. It is a viscous and heavy form of crude oil, embedded in sand and clay that has to be scrapped away with the use of machinery and chemicals and then mixed with lighter forms of crude oil in order for it to flow. There used to be plenty of jobs in the extraction process, with high oil prices sustaining them for a long time.


A dying business

However, with the price of oil having fallen 70 percent since June 2014 the cost of producing a barrel now outweighs the price that it sells for on the open market. This is compounded by high transportation costs, primarily via rail and road, and the rejection of the pipelines that were meant to bring down the price of transportation. This huge region has been left isolated and unprofitable and the future doesn’t look good for the Alberta tar sands, what with the economy shrinking and unemployment rising in Fort McMurray.


Fort McMurray
Fort McMurray, Alberta, Canada © Kris Krüg/Flickr


Whilst the future is daunting, it also presents a number of opportunities. This form of oil extraction, seen as one of the most environmentally catastrophic, may have to be scaled back, reducing risks such as pipeline leaks. This means that the Albertan economy has the opportunity to diversify itself and move towards more sustainable activities. The current issues may be a springboard to a much brighter and more environmentally friendly future.

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