Reserves of high-grade oil are in decline, says Byron King. Other hydrocarbons will be required to meet energy demand over the coming decades. But the cost of extracting and refining these resources is much higher than the current market price of crude. And that’s why cheap fuel is definitely not here to stay.

This from Rude Awakening:

The IEA estimates that the oil industry will have to invest over $350 billion per year to counter the steep rates of decline in output. And even that will not be sufficient to maintain levels of output for traditional forms of crude oil. Thus, much of the future investment will have to go toward extracting other kinds of hydrocarbon substances. And these “other kinds” tend to be very expensive to develop.

There are many different kinds of hydrocarbon molecules in the world. The total worldwide carbon base actually adds up to a very big number, and that is NOT including the carbon that is part of the current living biology of the planet. For now I’m just discussing the fossilized carbon like oil, natural gas, bitumen in tar sands, oil shale and coal.

The big problem for the non-oil forms of carbon is the cost of converting it into a viable fuel. We see that, for example, in the Canadian tar sands projects. Lots of steel, concrete, labor, machinery, water and energy input — all to extract this thick, gunky crud that has to be upgraded to something that looks like diesel fuel.

The tar sands are full of hydrocarbons, but they are not inexpensive to extract. The same goes for every other non-convention hydrocarbon source.

The nearby chart shows the total hydrocarbon resources in the world and the relative costs to convert them into a barrel of oil or oil equivalent. This is my summary, based on several different government and academic compilations:

These are big numbers, right? And they can supply a lot of energy over a long time…at a price. But that price will almost certainly be more than $60 a barrel…much more.

Source: $60 Oil…And Why it Won’t Last