Keystone XL Pipeline

Is the Keystone XL Pipeline good or bad? I looked at arguments from both sides. The Keystone pipeline already exists and the segment that transports oil from Canada to the Gulf of Mexico refineries has been in operation since January of this year. XL will roughly double the capacity of the pipeline. The industry wants to build XL while the environmentalists want to stop it. Building it would increase US imports of oil from Canada, specifically from the tar sands of Alberta. This oil is “dirtier” than imported oil from OPEC . The groups seeking to reduce greenhouse gases oppose this project on that basis along with other environmental concerns. The objective of the pipeline is to increase the capacity of the existing pipeline so that more crude oil from Canada (and also Montana, BTW) can be transported to the refineries on the Gulf Coast. Understand that the US gets about half of all the oil it needs from domestic sources and the other half from imports from other countries. Canada and Saudi Arabia are the two largest suppliers of oil to the US by a wide margin. The pipeline project will shift the supply of about 500,000 barrels per day of oil from other sources (including Saudi Arabia and OPEC) to Canada. Per US Energy Information Administration, Canada and OPEC each supply about 3.4 Million barrels of crude oil to the US per day. Shifting that market share from about 50:50 to 40:30 in favor of Canada is a big shift. I favor initiatives that reduce our need to import oil from the Mideast. Blocking the pipeline does not do anything to reduce the demand for oil in the US. We will refine just about the same amount of oil to meet our needs whether we buy it from Saudi Arabia and Venezuela or from Canada. I would rather see the money go to private companies in Canada than to governments in OPEC countries. Will it affect the price of gasoline in the US? Evidence suggests that it will. While there are arguments that it will cause the price to rise, recent developments in the world oil markets suggest otherwise. Recently the price of a barrel of oil has dropped from over $100 to around $75 and the price of gas locally has gone from near $4/gal to around $3. Most people agree that this is a good thing for our economy despite the fact that cheap gas reduces our incentive to lower our overall consumption. The cause of the reduction in price is twofold. There has been a worldwide reduction in the demand for oil and basic economics dictates that when demand slows for any product in a competitive marketplace, the price will fall. More pointedly, it has been widely reported in the financial media that the Saudis perceive the tar sands oil production to be a threat to their share of the world’s oil market. Because oil production from sources such as the tar sands has been increasing, the Saudis have decided to protect their share by reducing the price. Their intent is to reduce the incentive to produce oil from the tar sands by making it less profitable to do so. The Keystone Phase III which only opened in January is already having an effect reducing the amount of money we send to OPEC and we haven’t even started building XL yet. In my opinion, the people trying to block Keystone XL should redirect their efforts at reducing the US consumption of oil in our cars and trucks, in our factories and in our consumer products. That would be a more effective way to combat the expansion of greenhouse gases. If we did things like converting all semi-type trucks to natural gas and all local taxis and delivery vehicles like school buses and mail trucks to electric we could put a huge dent in oil imports while cleaning our air and preserving our environment. In the meantime, we should build the XL expansion to the Keystone Pipeline.