Heavy Problem: Dirtier Oil, Though Cheaper, Sparks Green Backlash
June 12, 2008, 11:45 am
The Wall Street Journal’s Ben Casselman reports:
Cheap oil! Get your cheap oil here!
Well, “cheap” may be pushing it. But even as benchmark crude futures have soared above $130 per barrel, there’s still oil out there for about $105 a barrel. The bad news: it’s nasty stuff.
Heavy, sour grades of crude oil trade at a discount because they cost more to refine and produce less of the premium products like gasoline and jet fuel. Iran has had such trouble selling its sulfur-rich oil that it’s got 14 tankers of the stuff floating in the Persian Gulf unsold. So yesterday, Iran and Kuwait slashed the price of their heavy oil; it’s now selling at the steepest discount in at least nine years.
Meanwhile, as prices soar for lighter, sweeter grades of oil, refiners are expanding their capacity to refine the dirty stuff, the Journal’s Ana Campoy reports. Or at least, they’re trying to. Last week, the Environmental Protection Agency rejected a permit to expand a refinery in Roxana, Ill., after environmentalists objected. Similar projects in California and Indiana have also faced challenges. At issue is the fact that heavier crudes require more energy to refine—meaning more greenhouse gas emissions.
Trouble is, there’s more heavy oil on the way. Canada might have a trillion barrels of oil in its tar sands, but they don’t call them “tar” for nothing. And it’s not just Canada; most new oil finds these days are “gooey, acidic, or laced with sulfur,” as the Journal’s Neil King Jr. put it in April.
So light oil is harder to find, heavy oil is harder to produce, and refineries are harder to build. All of which adds up to—you guessed it—higher gas prices. No wonder it’s bike to work week in Chicago.
http://blogs.wsj.com/environmentalcapital/2008/06/12/heavy-problem-dirti...
