Oil prices Thursday peaked at their highest level since late October sparking yet another debate about the viability of Utah's high-cost, high-risk shale oil reserves as an alternative fuel source.
The Green River Formation, a geologic swath stretching into Utah, Colorado and Wyoming, contains an estimated 1.5 trillion barrels of oil, according to the American Association of Petroleum Geologists.
The problem is, nobody seems to know how to get it out at a reasonable price.
"The technology has been around for a long time," said Larry Nation of the association "Now might be the time to put it to good use."
Oil prices settled in at $53.57 Thursday on the New York Mercantile Exchange. The record close set on Nymex last October was $55.17, though prices would have to surpass $90 per barrel to meet the inflation-adjusted peak set in 1980.
And prices could spike as high as $80 in the next two years. OPEC's Acting Secretary General told a Kuwaiti newspaper that oil prices could soar that high if there is a major supply disruption, wire services reported.
"I can stress that the probability that the price of a barrel of crude oil rises to $80 in the near future is a low probability," Adnan Shibab-Eldin told Kuwaiti newspaper al-Qabas. "However, I can't rule out the rise of a barrel of oil to $80 in the coming two years."
Investors won't be willing to shell out any funds for shale oil development if the price of oil is unstable. Shale oil development will only occur if the price of producing shale oil is comparable to that of crude oil, Nation said.
In the recent past, oil prices have been too low to even think about developing shale oil. But prices crept up again and look like they will stay that way, Nation said.
"There has to be enough confidence on the part of an investor that oil prices are going to stay high for oil shale to really take off," Nation said.
Previous attempts to extract oil from Utah's shale didn't work out during the oil crunch of the 1970s.
Oil prices surged to record highs during the 1973 OPEC embargo. Cars lined up for blocks at service stations, waiting to gas up on their designated day.
During that frenzy, a rush to find new fuel sources was born. Shale oil, tar sands, coal liquefaction anything to rescue American pocketbooks. Oil companies invested millions of dollars to develop shale oil in Utah, Wyoming and Colorado.
"They thought the era of oil was over, so unconventional resources became very important," Nation said. "Lo and behold, oil prices went down again."
OPEC dropped the price of oil back down following the shale boom of the '70s, ultimately stifling the industry. Oil companies invested millions of dollars to fund the technology to extract oil from shale but quickly shelved it after prices dropped.
Development stalled for more than 20 years. But with prices surging again, some companies are looking at their options concerning shale oil.
"We have to find some alternative, and we must begin the search for alternative sources for energy if we want to sustain our quality of life," Nation said.
Shell Oil Co. is testing experimental technology to extract oil from the area's many shale formations on private land about 200 miles west of Denver. Other oil companies are revisiting shale oil technology.
Some experts say the technology to extract oil from shale remains too expensive and the prospects are too risky when oil prices, while increasing, are still volatile.
"It's just expensive," said Doug Jensen, a reclamation specialist with the Utah Division of Oil, Gas and Mining. "There's a lot of bucks out there if they could ever figure it out."
One Utah man claims he has. Lindon resident Leon Smith says he can produce 14,000 barrels of oil a day at about $16 a barrel using his patent-protected process of extracting oil from shale.
Coal gasified at extremely hot temperatures will produce a synthetic gas. That gas is then cooled in a rotary kiln with the oil shale. Instead of condensing the oil into a crude form, it is sent to a fractionation tower, where the oil is cut into different grades."It's time to get our oil shale going now," Smith said. "There is no reason for us not to develop our own process."
Contributing: Associated Press
E-mail: [email protected]