We noted this by John Quiggin at Crooked Timber previously, but it is worth highlighting again. In it he notes how the Peak Oil crowd is in some important ways framing the energy debate incorrectly. While many worry about the trends in oil production and reserve growth, there is a wealth of other carbon-based fuels available to us. The question is whether they can be removed at a viable cost. Of course the other “big” question is whether we want to use these fossil fuels in light of the potential from global warming.

We were reminded of this by an article on the Canadian oil sands by Russell Gold in the Wall Street Journal. The article makes two important points. The first is that we are not close to running out of oil-based deposits. Second these deposits are “heavy” and can have a worse environmental impact. From the article:

The surging interest in Canadian oil sands is stark evidence that the world isn’t about to run out of oil. Instead, it is running low on readily accessible light, sweet crude — oil that flows like water, has few impurities and can be easily turned into gasoline. As the good stuff gets scarce, Big Oil is turning its attention and pouring money into extra-heavy crude, such as the giant deposits near Fort McMurray and another similar one in Venezuela.

But heavy oil has big economic and environmental drawbacks. It costs more to produce and takes more energy to turn into gasoline than traditional light oil. Recovering and processing Fort McMurray’s heavy crude releases up to three times as much greenhouse gas as producing conventional crude. And upgrading it into refined products, such as gasoline or diesel, will require a gigantic investment to retool global refineries.

The potential for short-term supply shocks has kept the oil markets on edge for quite some time. It will take an extended period of time for alternatives like the oil sands (or ethanol) to come on-line in a significant way. Until then we will be forced to look at geopolitics and their potential to effect the oil markets.