For nearly the first time, opponents of the oilsands are attempting to do something they haven't done before: they're attempting an economic argument against the oilsands.
This is not the same as attempting to undermine the economic case for the oilsands, such as when they dispute the projections of jobs, long-term and short-term, that would be created by the Keystone XL or Northern Gateway pipeline. Now, they're attempting to make economic arguments of their very own.
Some of them almost seem quite novel. Consider, for example, one that recently appeared in The Motley Fool. In it, GMO co-founder Jeremy Grantham makes the following bold declaration:
"I believe anyone investing in tar sands is very likely to end up with stranded assets in the next decade or two. Solar is getting cheaper by the minute, whereas petroleum is getting more expensive. It is only a matter of time before their expenses cross."
For the record, I don't necessarily disagree -- to a point. Personally, I do hope that the expenses of solar energy and petroleum intersect. But to pretend that will happen within the next 10-20 years is simply to overlook the slow rate at which solar technology has been developing. Which is not the only thing this analysis overlooks.
As it turns out, the production of oilsands petroleum has not been getting more expensive -- it's in fact been getting less expensive, especially when compared to other sources of unconventional crude. The supply cost -- the total cost of putting a product into the domestic market -- for most energy companies relying on petroleum assets in 2012 was $99.16 per barrel. A big driving factor of this is the cost of replacing reserves: in other words, the cost of exploration and drilling.
But oil sands projects don't have that particular problem. During the same period of time, the supply cost for oil sands petroleum ranged from $50 to $90 per barrel. A minimum of ten percent less.
Apparently Jeremy Grantham hasn't noticed this. But Warren Buffet did.
Buffet isn't known for betting on losing enterprises. On June 30, 2013, Buffet purchased 1.7 million shares in Suncor. This helped drive the price of Suncor shares up $4.45.
In other words, the market simply isn't doing what the economic detractors of the oilsands are insisting it's going to do.Which shouldn't come as much of a surprise to anyone.