Recently, Hugo Chavez (Venezuelan dictator)has been crowing about his countrie’s reserves of “heavy oil”. This is not the good stuff (light sweet crude), but rather very dense, tarry stuff. Still, there is a LOT of it around-Canada has massive deposits of heavy oil in sand, and the USA has oil locked up in oil shale. So, given the situation in the ME, why aren’t we developing these sources? We are spending $5 billion/week in Iraq-and a fraction of that money would help us become independent of that region.
Sure, it costs more to refine, but we don’t have to deal with backward theocratic, repressive regimes.
Could Canada replace SA as the largest producer, based on tar sands?
We are developing it. In fact, Alberta is ramping up tar sands development so fast that it is straining our infrastructure. We have real shortages of workers, housing, roads, you name it. Billions are pouring into tar sands development.
That said, the tar sands will never produce oil at the rate that the Saudis can. Extracting and upgrading the heavy oil into something useable is very capital-intensive. So, while there’s a lot of oil there, it won’t come gushing forth fast enough to have much impact on the Saudis’ influence on the oil market.
As someone looking to buy a house in Edmonton right now, let me add: 
I must point out that while his rule may not be as liberal as we are use to in the west, Chavez was by all accounts democratically elected, so I would hesitate to call him a “dictator”.
As per your question. My father who is a geophysicist in the oil industry says that at current prices for oil, the oil sands will be quite profitable baed on current cost estimates for infrastructure. I think maybe $40/barrel was his conservative cost for the oil sands. Thus the big boom in Calgary/Edmonton/Grand Prairie.
The problem, and this is a significanttly simplified explanation, is that treatment of the raw bitument is extremely energy intensive. Current methods use natural gas to fuel the extraction process. The oil sands are in close proximity to large gas wells, making it a fairly simple solution, although there is talk of building a nuclear power plant for the future.
Sorry, premature post. I must also add that rising Chinese energy demand means bullish prospects for future oil prices, making infrastructure investments that much more attractive.
Want to know something that we in the industry think could be an interesting development? Oil in Montana and North Dakota. There’s a huge deposit locked up in rock that has been very difficult to get to, and which typically had a very low yield, which could turn out to be a pretty important new field. There was IIRC an article in the WSJ this week on it (q.v.), which I think downplays a bit on what might be the reality. I think people are in a speculate mode where they’re trying to keep it as quiet as possible so they can buy mineral rights on the cheap, but then, that’s just IMO…