Oil shale economics deals with the economic feasibility of oil shale extraction and processing. Although usually oil shale economics is understood as shale oil extraction economics, the wider approach evaluates usage of oil shale as a whole, including for the oil-shale-fired power generation and production of by-products during retorting or shale oil upgrading processes. The economic feasibility of oil shale is highly dependent on the price of conventional oil, and the assumption that the price will remain at a certain level for some time to come. As a developing fuel source the production and processing costs for oil shale are high due to the small nature of the projects and the specialist technology involved. A full-scale project to develop oil shale would require heavy investment and could potentially leave businesses vulnerable should the oil price drop and the cost of producing the oil exceed the price they could obtain for the oil. Due to the volatile prices and high capital costs few deposits can be exploited economically without subsidies. However, some countries, such as Estonia, Brazil, and China, operate oil-shale industries, while some others, including Australia, United States, Canada, Jordan, Israel, and Egypt, are contemplating establishing or re-establishing this industry. The production cost of a barrel of shale oil ranges from as high as US$95 per barrel to as low US$25 per barrel, although there is no recent confirmation of the latter figure. The industry is proceeding cautiously due to the losses incurred during the last major investment into oil shale in the early 1980s, when a subsequent collapse in the oil price left the projects uneconomic.
Break-even price of crude oil
The various attempts to develop oil shale deposits have succeeded only when the cost of shale-oil production in a given region comes in below the price of crude oil or its other substitutes (break-even price). The United States Department of Energy estimates that the ex-situ processing would be economic at sustained average world oil prices above US$54 per barrel and in-situ processing would be economic at prices above $35 per barrel. These estimates assume a return rate of 15%. The International Energy Agency estimates, based on the various pilot projects, that investment and operating costs would be similar to those of Canadian oil sands, that means would be economic at prices above $60 per barrel at current costs. This figure does not account carbon pricing, which will add additional cost. According to the New Policies Scenario introduced in its World Energy Outlook 2010, a price of $50 per tonne of emitted CO2, expected by 2035, will add additional $7.50 per barrel cost of shale oil. According to a survey conducted by the RAND Corporation, the cost of producing a barrel of oil at a surface retorting complex in the United States (comprising a mine, retorting plant, upgrading plant, supporting utilities, and spent shale reclamation), would range between $70–95 ($440–600/m3, adjusted to 2005 values). This estimate considers varying levels of kerogen quality and extraction efficiency. In order for the operation to be profitable, the price of crude oil would need to remain above these levels. The analysis also discusses the expectation that processing costs would drop after the complex was established. The hypothetical unit would see a cost reduction of 35–70% after its first 500 million barrels (79×10^6 m3) were produced. Assuming an increase in output of 25 thousand barrels per day (4.0×10^3 m3/d) during each year after the start of commercial production, the costs would then be expected to decline to $35–48 per barrel ($220–300/m3) within 12 years. After achieving the milestone of 1 billion barrels (160×10^6 m3), its costs would decline further to $30–40 per barrel ($190–250/m3). In 2025 Incorrys estimates that the lowest average full cycle cost for US tight oil in 2022-2024 was in the Permian Delaware at $48.50/Bbl followed by Williston at $54.00/Bbl and Permian Midland at $59.00/Bbl. Full cycle cost includes capital and operational cost, basis differential to WTI, royalties and taxes, general and administrative expenses, and cost of capital for oil producers. In 2005, Royal Dutch Shell announced that its in situ extraction technology could become competitive at prices over $30 per barrel ($190/m3). However, Shell reported in 2007 that the cost of creating an underground freeze wall to contain groundwater contamination had significantly escalated. Anyway, as the commercial scale production by Shell is not foreseen until 2025, the real price needed to make production economic remains unclear. At full-scale production, the production costs for one barrel of light crude oil of the Australia's Stuart plant were projected to be in the range of $11.3 to $12.4 per barrel, including capital costs and operation costs over a projected 30-year lifetime. However, the project has been suspended due to environmental concerns. The project of a new Alberta Taciuk Processor which was planned by VKG Oil, was estimated to achieve break-even financial feasibility operating at 30% capacity, assuming a crude oil price of $21 per barrel or higher. At 50% utilization, the project was expected to be economic at a price of $18 per barrel, while at full capacity, it could be economic at a price of $13 per barrel. However, instead of Alberta Taciuk Processor VKG proceeded with a Petroter retort which production price level is not disclosed. Production costs in China have been reported to be as low as less than $25 per barrel, although there is no recent confirmation of this figure.
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