Smash hit

“The price is really a red herring. What drives price is scarcity, and that is what drives these state groups,” said one senior oil-industry consultant.

“They want to make sure they have oil in 20 years’ time. They are not too concerned about the price they have to pay because they know they have to have it.”

Canada is one of the biggest beneficiaries of the booming oil price. Its huge reserves of tar sands — a sludgy mix of soil and heavy oil — have been mapped for decades, but the relatively high cost of recovery and processing have kept them out of the mainstream oil game.

At $139 a barrel, however, Alberta, the state where most of the tar sands are located, has become an oil province to rival Saudi Arabia. The Athabasca sands are thought to contain 1.7 trillion barrels of oil, nearly as much as the amount of conventional oil estimated to remain in the ground worldwide.

Big oil groups such as Royal Dutch Shell and Exxon Mobil are ploughing billions into Canada, while rivals like Eni, the Italian group, are pushing into new territories. Eni recently announced the discovery of an oil-sands province in the Democratic Republic of the Congo that should yield about 2.5 billion barrels.

Extracting the oil comes at a high environmental price, however. The hydrocarbons are normally flushed out by injecting hot water or steam and caustic soda into the mined sands, which brings the oil floating to the top.

It is skimmed off, and usually mixed with lighter conventional oil before being piped away.

The Environmental Integrity Project (EIP), a lobby group set up by former lawyers at America’s Environmental Protection Agency, last week published research claiming that hydrocarbons from oil sands generated three times as much greenhouse gases as those from conventional sources. The extra emissions came from the energy used in digging up and processing the sands, the EIP said.

Eric Schaeffer, EIP director, said: “It’s hard to imagine what else it is that the US oil industry could do to go backwards further and faster than to rely on Canadian tar sands or similar resources in the United States.

“Not only would this mean significantly more pollution overall, but it would substantially boost the greenhouse-gas emissions linked to global warming.”

The oil-sands rush is part of a reassessment of prospects in North America.

“Most people forget America is still a top-five oil-producing country,” said Bob Fryklund, vice-president of industry relations at the consultancy IHS.

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