Enviro-Freak Economics: Keystone XL would raise price of gasoline

Because that’s how the law of supply-and-demand works?

Environment and Energy Daily reports,

Environmentalists today are aiming an arrow at the economic case for the Keystone XL pipeline made by the GOP and industry, releasing a report that savages the controversial project as a giveaway to Canadian oil companies with no benefits to U.S. consumers…

“Keystone XL’s backers want to re-direct tar sands oil from the American Midwest to reach the international market, where tar sands oil would fetch a higher price,” NRDC and OCI write in their new report. “The Keystone XL pipeline would thus add billions of dollars to their annual profits while raising the cost of oil for millions of American consumers in the U.S. heartland.”

At the heart of the conservation groups’ report is a contention made by three oil companies during a 2009 evaluation of the XL line before Canada’s National Energy Board: that the northern nation’s oil sands crude producers would not be able to fill the pipeline’s daily capacity of up to a half-million barrels in a timely enough fashion.

That excess capacity, greens say, underscores the value of the pipeline as a profit-builder for refineries that aim to send finished products overseas, effectively diminishing Keystone XL’s value to everyday U.S. fuel users.

Canadian policymakers make no secret of their desire to diversify an oil sands crude export market currently dominated by the United States. “You’re not going to become a global superpower of anything with one customer,” then-Alberta Energy Minister Ron Liepert told E&E Publishing in August (Greenwire, Sept. 13, 2011).

That fuel prices in the Midwest — where most Canadian oil sands pipelines currently terminate and refiners pay less for crude from that region — would necessarily rise as a result of Keystone XL, however, is a claim hotly disputed by supporters and Obama administration analysts who endorsed the project last year.

“Midwest refiners used to pay more for oil because oil had to flow north from the Gulf,” analysts at the Energy Department wrote in a June memo to the State Department, which is leading environmental review of the pipeline pitch. “Now, with Bakken crude, Canadian [oil sands product] and other land-locked supplies, oil needs to flow south.”

“The crude price advantage” currently operative for Midwestern refiners is not justified by long-term transportation costs, the DOE analysts continued. “Eliminating these constraints [behind the advantage] would result in a more competitive oil market.”

Bringing the debate over Keystone XL’s economic impact into such wonkish territory may yet cloud the broad-brush drama over the pipeline, which many observers expect the administration to reject or at least punt on before Feb. 21, the deadline pushed by Republicans…

One thought on “Enviro-Freak Economics: Keystone XL would raise price of gasoline”

  1. Are the writers of the report Economists? I have my doubts that they even understand the meaning of demand and supply.

    The analysis of the watermelons absolutely stinks. They show that they have no true understanding of the laws of demand and supply.

    Or, perhaps it is a case that the local market is being constantly ignored in favour of those overseas markets. If that is the case then it could be argued that the markets are being skewed, but it should not be an argument against the actual project.

    Sheesh, do the watermelons actually know anything? Or do they just make things up? They cannot even get Keynesian economics correct!!

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