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What are Oil Sands?

Also called tar sands, oil sands are areas of the ground that contain a viscous form of oil called bitumen.

How Do Oil Sands Work?

Alberta, Canada, is famous for its oil sands, which are important sources of oil but require special extraction methods. Bitumen does not flow unless heated or diluted; when it is at room temperature, it acts much like cold molasses, according to the Alberta Environment and Sustainable Resource Development Oil Sands Information Portal.

After clearing the area of trees, miners remove the top soil and clay. The oil sands are put into large trucks, which take the materials to refineries. Oil sands that are deeper underground are typically pumped to the surface using a steam process. The refineries process the sands into gasoline and other petroleum products, which are shipped to various markets via pipeline.

It is generally more expensive to obtain oil from oil sands than it is to obtain oil from conventional drilling and rigs. The environmental impact of scraping off the surface of an oil sands area is also very controversial. However, Alberta has proven oil reserves of 170.8 billion barrels, almost all of which is bitumen. According to the Alberta Environment and Sustainable Resource Development Oil Sands Information Portal, this is enough to meet Canada's current oil demand for almost 400 years.

Why Do Oil Sands Matter?

Oil production is very important globally for obvious reasons. Because so much of the oil sands exist in Canada, one of the United States' closest allies, oil sands are an opportunity to obtain oil closer to home. However, changing market prices for oil can make oil sands extraction 'worth the cost' one day and 'not worth it' the next.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.