The Price of Oil: What Are We Talking About Exactly?

The rising price of oil is on a lot of people's minds these days. It hasn't quite hit $100/barrel yet, but it's getting close ($94 as of this writing). I was reading Elizabeth Kolbert's article about extracting oil from the Alberta tar sands in the New Yorker this morning, and it occurred to me, as I read that 4500 pounds of tar have to be dug and separated into their constituent parts to get enough of the bitumen that can be refined into one barrel of oil, that I had no idea how much oil was in a barrel.

I'd always pictured it like the one here -- it's the size we think of when we think of a generic barrel -- but that couldn't possibly hold enough oil to justify the expense of digging up the 4500 hundred pounds of tar, could it? An official barrel of oil must be much more massive.

Turns out, that barrel in my mind is an official barrel of oil, the one that costs nearly $100 now. It holds 42 gallons of oil, about half of which is destined to become gasoline. The rest is made into things like jet fuel, fuel oil, asphalt and lubricants. So, one barrel of oil yields about 21 gallons of gasoline, or about two-thirds of an SUV's gas tank.

The reason it's at all profitable to convert those 4500 pounds of sludge into a barrel of oil is that, all told, it costs about $30 per barrel to do so. It was only a few years ago that oil was at $38, making tar-sand extraction unattractive. The process isn't nearly as efficient as conventional oil extraction, though, so the environmental impacts are much worse.