Right now oil shale *is* net energy negative and the EROI on tar sands is pretty low. Forget about them even though new technologies to make extracting and processing them more efficient do have long-term potential.

When it comes to heavy, sour crude, we’re awash in an ocean of oil. The problem is that the refining capacity just isn’t there yet. Valero has built an incredible business on being able to refine heavy crude. How’d they do it? Back in the 1980s, they saw the future and invested in building up the capacity to refine this crude.

The cost of upgrading facilities to handle heavy, sour crude is incredible. A hydrocracker can cost as much as 8 or 9 figures depending on processing capacity, for instance. Because the spread between the cost of the heavy, sour crude and the refined product has increased and will continue to increase (thus offering much higher refining margins that boost the bottom line), you can expect to see more production capacity in this area but it isn’t going to happen overnight.

Those future barrels and their feasibility are projections (e.g. it could well be that shale oil and majority or tar sands are net energy negative). Let’s look at the recent figures instead.

World’s oil “production” has been basically flat since ‘05, despite sharp increases in prices. For example, look at
http://gailtheactuary.files.wordpress.com/2007/06/world-oil.jpeg

They would love to sell more, because they are collecting incredible profits, and money *now* never hurts, but they cannot.

If this is true, it is a unique situation and not currently reflective of money market funds in general. Typically money market funds invest in instruments such as T-bills, CDs and commercial paper.

I’m not a securities expert by any means, but if Comerica was investing funds that had been put into its money market accounts into ARS’s (which VentureBeat seems to imply), I believe it may have been violating Rule 2a-7 of the Investment Company Act of 1940 which specifies what type of securities money market funds are permitted to hold (amongst other things).

Of course, the entire financial system is a house of cards anyway. If you have an FDIC-insured money market deposit account, for instance, it’s worth noting that the FDIC insures more than $3 trillion worth of deposits yet only has insurance funds of $44 billion according to the FDIC website. In other words, if the house of cards starts to crumble, everybody is fucked.

Also pimping a link just this once. Drama, you missed the most crucial pieces of all. A lot of the money market accounts were backed up by the BANKS investing in auction rate notes. So even the money market accounts are getting screwed.

Nope, nothing to see here. Everything is FINE FINE FINE!

The truth is that we’re swimming in oil. Much of it, however, is hard to reach and much of it is heavy, sour crude that is difficult to transport and refine. The Orinoco belt in Venezuela, for instance, has a significant amount of heavy crude (some estimate 300 billion barrels) but it’s not being fully exploited for a number of reasons, including the fact that we don’t have enough heavy crude refining capacity.

Throw in other potential sources of oil, such as oil shale, for which there are probably around 3 trillion barrels worth of deposits and it’s clear that we are not running out of oil – we simply lack the ability to get to all of it, transport it and refine it. At current prices, however, it becomes economically feasible to start tapping into some of the unconventional reserves that were previously not viable to exploit. But exploiting these reserves isn’t going to happen overnight. Significant investment, R&D, etc. is required but fortunately, unlike in some markets (such as consumer Internet), if there’s money on the table, you can be sure oil men are going to make things happen to get it.

Also note that speculators are also playing a role in driving up oil prices but it’s hard to determine what portion of the price increase is due to instrinsic supply/production limitations and what portion of the price increase is due to investor speculation.