Why Keystone will Raise Gas Prices

March 8, 2012

Washington Monthly:

“I’ll get us that oil from Canada,” Mitt Romney said in his victory speech after the Michigan primary. He was referring to Keystone XL, the crude-oil pipeline that has become a top-tier campaign issue for Republicans.

Problem is, the tar-sands oil in that pipeline wouldn’t be coming to “us.” It would go directly from Canada to refineries in the Gulf region en route to export markets in Latin America and Europe. The U.S. would be used as little more than a transit corridor.

We’ve heard a lot about groundwater contamination near the completed portions of the pipeline — more than a dozen spills of the highly corrosive oil, including one near Kalamazoo, Michigan, that they can’t seem to clean up. Conservative Nebraskans became greens overnight when they learned the details of the project that will go through their state.

But the immediate effect of completing the Keystone pipeline (perhaps by 2015) is more surprising and counterintuitive.The project would increase domestic oil prices by more than $6 a barrel and prices at the pump in parts of the country by about 20 cents a gallon. You read that right. At a time when rising gas prices threaten President Barack Obama’s re-election, the Republicans’ most ballyhooed remedy — a new pipeline — would make the problem worse.

TransCanada’s plan to jack up oil prices is hiding in plain sight. In the appendix to its application to the Canadian National Energy Board (helpfully provided to me by the Natural Resources Defense Council), the company brags that its project is “expected to realize an increase in the heavy crude price of approximately $3.00 per barrel by avoiding a discount” at the U.S. Gulf Coast. The market price of heavy crudes should rise an additional $3.55 per barrel when the new pipeline “relieves the oversupply situation in the Midwest.”

That oversupply, which holds down prices, is a result of more oil flowing south from Canada into Midwestern refineries. (It used to flow north from the Gulf region, which was more expensive.) The Canadians “propose building the Keystone line to go around Midwest refineries,” says Philip Verleger, an oil industry consultant and professor at the University of Calgary.

John Kilduff, an oil analyst at Again Capital, reminds me that eventually the supply bottlenecks (most famously in Cushing, Oklahoma) will ease, the oil will flow, and sharply increased supply from Canada will push down global oil prices.

Maybe so, but in the meantime the Keystone XL pipeline has become just another example of Republican hype. Like the false claim that Obama is hostile to oil leasing (in truth, he has greatly expanded it) and intent on putting the industry out of business (so why the record profits?), this debate feeds dangerous myths about our energy future.


4 Responses to “Why Keystone will Raise Gas Prices”

  1. dana1981 Says:

    It seems like virtually every Republican position is based on “common sense”, and that “common sense” is based on ignorance. It’s “common sense” that building Keystone will lower gas prices, that tax cuts to the rich will trickle down to create jobs, that humans can’t possibly have an impact on something as large as the global climate, that putting a price on carbon emissions will cripple the economy, etc. etc. If you do any research on any of these subjects you discover that the “common sense” position is actually nonsense. Republicans rely on Americans remaning ignorant and getting their “news” from Fox News and Rush Limbaugh. And they try to make sure Americans stay ignorant by cutting education spending, trying to teach creationism and global warming denial in schools, etc.

    They claim to be the party of patriots, but really they’re trying to make the country as shitty as possible in order to benefit the few super-wealthy individuals.

  2. Bruce Miller Says:

    Hate to disappoint the lying bastard, but the Tar Sands Oil is already Corporate Property! Corporations he holds shares in! He is already selling that very same oil to the world at world prices right now, why in Hell would he take a substantial loss in his share value, in his dividends, to suddenly “Nationalize” a foreign, sovereign countries assets?
    FACTOID: Mitt Romney himself, or his legal minions, sat on the boards that decided that sales of Canadian Tar Sands Oil to China for substantial Corporate profits was a good idea! You Google you see!
    “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” – John Maynard Keynes
    Hzarper’s Bazaar, a government with the Corporate penis in it’s mouth, sucking hard for milk – not gonna happen. America you are in this same boat.

  3. […] Why Keystone will Raise Gas Prices (climatecrocks.com) […]

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