The Politics of a Pipeline | Green Energy News

December 26, 2011 – Vol.16 No.41

THE POLITICS OF A PIPELINE.
by Bruce Mulliken, Green Energy News

Sometime early in 2012 President Obama will have to approve, or not, construction of the Keystone XL pipeline which, if built, would deliver oil from the tar sands of Canada to refiners on the U.S. Gulf coast.

As with everything Washington, Keystone has become a political issue. In the upcoming Presidential election year Obama may make his decision based on votes, not whether the project is good or bad for the country in an economic or environmental sense. A YES decision would anger the left, but they’ll probably still vote for him in the Fall. A NO decision would make the right happy, but they still won’t vote for him. So, as usual, it’s the middle, the swing voters, that Obama has to worry about. A third position, finding a clever way to delay the decision until after the election, would be considered “an indecisive decision” and hurt his votes from the middle. Voters like decisive presidents.

(A fourth position may be possible. I’ll get to that in a bit.)

He may also be forced by events half a world away to give a go-ahead for the pipeline. It’s entirely possible that Iraq will fall into a civil war sometime in 2012. If so, the price of oil will skyrocket and there will be calls for more oil production, including from the tar sands of Canada. Lost on voters, as well as with Congress, would be that a war would likely be over before the pipeline was completed, thus its construction would have zero effect on global oil prices. Still political pressure could cause Obama to give the thumbs up for construction to begin. Given the recent bombings in Iraq we may know Obama’s decision before he even makes it.

Keystone, if built, will likely bring more development, more production sooner than later, to the Canada’s tar sands. Keystone, if NOT built will NOT make the tar sands go away. The sands are a pot of gold for Canada as well as all parties involved. They’ll get the oil whether Keystone is built or not. The pipeline just makes it easier to exploit the oil resource.

The pipeline, again if built, will certainly create some jobs in the U.S. at a time when every job created is important. However, most of the jobs would be short-lived and when the project is completed most workers will be given pink slips, or probably something less formal.

If there is long term job creation in the U.S. from Keystone, it would be with refiners as well as shipping companies on the Gulf Coast. A new supply of crude will mean more refining. More refining will mean more jobs and more refined product, such as diesel and aviation fuel, will pass through shipping companies.

tarsands

Canada's tar sands will continue to be exploited whether the Keystone pipeline is built or not.

What’s NOT guaranteed with the construction of the pipeline is whether the additional supply of oil will mean lower prices at the pump for American drivers. Oil is sold on global markets. World demand and supply, as well as fear of supply disruption, determines the price of oil. However, the price of refined products, such as gasoline, can be determined by local, regional or national supply and demand. Currently, gasoline is relatively low-priced compared with the cost of oil. Better fuel economy from cars and trucks, as well as a shift away from large SUV’s and light trucks, has eased demand on refiners to the point where refined fuels are now an export item. Exports, no matter where they come from, are good for the U.S. Exports bring new money into the economy. Some portion of the oil sands oil would become exports. This is a point in favor of the pipeline.

All that said, there’s another way for Obama that would make many happy and anger fewer: Approve the pipeline with some strings attached. Say YES provided current incentives for clean, renewable or efficient energy are extended well beyond current expiration dates. Or say YES provided his proposed doubling of fuel economy standards are given the go ahead. Or both, or some alternative, that ensures a long solid future for renewables and energy efficiency, particularly with vehicles.

As above, pipeline or not, Canada’s tar sands are going to be exploited. That’s a given. Only Canada can stop it. And it’s not interested.

Politically, since much of the renewable energy resources in the U.S. are in conservative states, and enjoyed by voters and industry there, Obama would get some support for this fourth approach. The left and environmentalists, though whining about the decision, would like see the growth of solar, wind, and electric cars continue. Automakers, too, might applaud the strings-attached decision. They’ve found new life new revenues in fuel efficient cars and trucks. They’ve made considerable investments in energy efficiency. They’ve supported the decision to double fuel economy. They might support this position as well.

A “YES with strings attached decision” would make a statement to Canada and tar sands operators there: “Yes, we’ll transport your oil. We’ll refine it and make lots of money at it. But, we’ll do everything we can to avoid burning it ourselves.”