Economics - The Facts on Oil Funds (Essay Sample)

The Facts on Oil Funds
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The Facts on Oil Funds
The world relies on energy sources that pose little risk to the environment. For a long time, there has been reliance on coal, natural gas and oil. The traditional reliance on these energy sources has shifted to the use of renewable energy sources and more cleanly sources of energy such as hydro and nuclear. In as much as there is need to reduce the use of energy sources that present challenges of environmental degradation and green house gases to the atmosphere, it has not been possible to completely outface the traditional energy sources. All forms of energy production keep increasing to meet the growing demand for energy. Presently, Canada is among the few countries in the world with unique position to provide sufficient, safe and secure energy for both its citizens and the rest of the continent. This task looks at the oil sands of Canada as possible savior to the increasing energy demand and its sustainability in the face of incessantly increasing environmental concerns.
There are 173 billion barrels of oil in Canada that can be recovered economically using today’s advanced technology. Of the 173 billion barrels, 168 barrels are placed on the oil sands. The most important facet in ensuring the available oil becomes useful to the society is using the right technology. The right technology and innovation is imperative to developing the oil sands in addition to improving environmental performance. The world over, a majority of world oil reserves are under the ownership and control of national governments. Just 19% of the world oil sand reserves are accessible to the private sector to invest in. 56% of these oil sands available for the private sector to control and invest in are in Canada. This makes the country the third largest oil reservoir in the world with the best chances of proper management and mining.
Researches reveal that energy demand for the whole world will increase by 35% by the year 2035. The escalation in energy demand is expected to hit an all time high as there is an improvement in the living standards of global population. Additionally, there is economic growth in both developed economies and developing countries. All sources of energy that are developed responsibly will be needed for meeting economic growth in the global demand. Currently, there is a decrease in the supply of conventional oil supply. This makes the supply of unconventional oil sources such as oil sands important for sustainable energy provision.
Oil sands refer to a mixture of water, sand, clay and bitumen. In Canada, oil sands are found in a number of deposits. These sites include Peace River, Athabasca and Cold Lake Deposits in Alberta in addition to Saskatchewan. In areas around Fort McMurray, the oil sands are nearest to the surface of the earth than other deposits. In the oil sand deposits, bitumen is often found deep underground. However, some form of the substance that is usually thick and too heavy to flow or pump without prior dilution or heating occurs near e earth’s surface. Recovery of oil sands for economic use takes place in two major ways. The first method is by means of mining. The other method is by drilling, also known as in situ. The method used to recover the oil sands from their deposits depend on the depth of the deposits from the earth’s surface.
Eighty percent of oil sand deposits in Canada are too deep to allow for collection of bitumen using mining method. For this reason, wells are drilled in a process known as in situ. This process enables deep seated bitumen deposits to be reached without causing much disturbance to the land and leaving open ponds on the mine areas. In situ method involves the use of advanced technology to inject combustion, steam or other sources of heat into the reservoir to warm the bitumen so that it can be pumped to the surface of the wells through recovery wells. The other 20% of the oil sand deposits are close enough to the ground surface to be mined using simpler and less involving mining techniques.
The oil reserves in Canada are expected to be of great economic importance to both the country and its neighbors. It will contribute an estimated $2.1 trillion in Canadian Gross Domestic Product over the next 25 years. This translates to annual GDP contribution of $84 billion. According to 2010 statistics, the sector alone will provide enough annual income to sustain 80% of Canadian households in a year. In addition, the oil sand reserves are expected to pay $122 billion to the provincial and $311 billion to the federal government in taxes. Further, there will be a payment of $350 billion to provincial royalties. These sums up to a total of $783 billion tax contribution in the next 25 years from the oil sands. A majority of the oil sand economic impacts are generated outside Alberta. Much of the oil sands economic impacts generate in the rest of Canada, the United States and the rest of the world. Close to every region in Canada has been stimulated by oil sand development. There is stimulation of economic growth and job opportunity creation.
Other than improving the economy via royalties and taxes, oil sand industry is an important employer and creator of jobs throughout North America. As a result of new oil sands in Canada, there is an expectation that there will be an increase in job opportunities from 75,000 in 2010 to 905,000 jobs in 2035. Of these, 126,000 job openings are expected to be outside Alberta. There will be further economic boost and creation to areas outside Canada as the materials, goods and services used in the situ...