The FT has an interesting article considering the oil price at which alternative fuels become feasible. At $140+ it seemed all alternative energy sources were go, but how many of them still are?
According to the FT, Middle East fields (like Saudi and Bahrain) and Venezuela’s Orinoco Belt have 940bn barrels of reserves in total, which are worth exploiting when oil is above ~$30. That’s in line with analyst considerations, Saudi can certainly survive at $30 but countries like Kuwait have a high initial capital cost, so prices may need to be higher before investment there is comfortably efficient.
Next up is Brazilian sugar cane ethanol and conventional oil from the rest of the world, at $45. Brazil is leaps and bounds beyond everyone else when it comes to the Ethanol as fuel market. Due to heavy government support and well maintained infrastructure, Ethanol accounts for 50% of Brazilian gasoline use. This government support and experience explains why Brazilian Ethanol is feasible at such low prices.
U.S. corn ethanol becomes efficient at ~$65, as does deep water drilling, which could produce between 160-300bn barrels. When oil prices hit $70, traditional coal can be used to efficently generate electricity, and at a few dollars higher the first ‘clean’ sources become viable, with on-shore wind farms priced at $75. That’s good news for T. Boone Pickens, whose planned world’s-largest-wind-farm in Texas is depending on cost efficiency.
AT $90, the Canadian Oil sands open up roughly 174bn barrels, but those projects have so much capital invested already that they’ll come on-line in the next few years regardless of oil prices.
At $110 coal to oil conversion and the Bakken shale becomes feasible. One of America’s latest and most important oil finds, the Bakken shale in North Dakota could hold anywhere between $167 and $300bn barrels of recoverable oil. Given the benefits of job creation and improved national security, the American government should consider subsidising development, and commence building even if prices are lower than $110.
Lastly, at $140+, nuclear energy, carbon capture storage and offshore windfarms become feasiable. That’s bad news for the London Array, Europe’s largest planned wind farm which is already losing uncertain investors. The FT gives a considerable range for nuclear though, suggesting development could work between $90 and $140. Oil Energy Money would err closer to $90 given the huge government support from countries like France.
All told, the graphic is an interesting representative of when, and if, alternative fuels should be considered. If prices are below $30 though, we may need Reindeer to pull us across the country. Oil Energy Money would like to wish its readers Happy Hoildays, and many sound investments for the new year.
