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Anthony Swift’s Blog

Ukraine doesn't bolster case for Keystone XL tar sands pipeline

Anthony Swift

Posted April 3, 2014 in Moving Beyond Oil, Solving Global Warming, U.S. Law and Policy

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After their argument that Keystone XL would be a national job creator has been widely debunked, promoters of the embattled tar sands pipeline are now turning to the international crisis in the Ukraine for a reason to build the project. They argue that approving Keystone XL will help our allies in Europe and undermine Putin. Some foreign policy and energy analysts have concluded that this argument is simply too silly to take seriously. However, as Congressional boosters of Keystone XL begin to raise the Ukraine crisis as a reason for pro-Keystone XL legislation, the time has come kick the tires on this silly argument. Fortunately, Keystone XL has been sufficiently analyzed that the answers to this question are a matter of public record. The State Department’s Final Supplemental Environmental Impact Statement (FSEIS) shows that Keystone XL wouldn’t displace either Russian or Venezuelan crude from the global market, increase exports of crude or refined product to Europe or have a measureable impact on global oil prices. In reality, reducing our dependence on oil through efficiency measures and cleaner alternatives is the path toward achieving national and economic security in the face of a volatile global oil market. And as both the Pentagon and the State Department have pointed out, climate change poses the one of the greatest national security threats facing our country – and Keystone XL would only add fuel to the fire.

Proponents of Keystone XL argue that it will enable increased production of tar sands which will increase the amount of oil available to our allies in Europe. It is worth noting that by acknowledging Keystone XL’s role in enabling tar sands expansion, proponents of the project are tacitly acknowledging that the pipeline will generate the substantial climate emissions associated with that expansion. Nonetheless, Keystone XL is unlikely to have a significant impact on Europe’s energy security. As Michael Levi of the Council of Foreign Relations has pointed out, the world oil market is large and fluid. While diverting 830,000 bpd of tar sands from Western Canada and the U.S. Midwest is likely to increase tar sands prices in that 4 million bpd refinery market, it is just a drop in the bucket relative to the 90 million bpd international market. According to Michael Levi:

“[T]he idea that U.S. oil exports would give Europe some sort of special buffer is silly. The world oil market is pretty flexible, and U.S. exports would be a drop in an already large sea. To the extent that Europe is constrained in its ability to switch oil sources quickly, that’s because of infrastructure, something U.S. exports wouldn’t change.”

Moreover, while the State Department review of Keystone XL has acknowledged that the majority of the tar sands crude from that pipeline is likely to be exported internationally after being refined in the Gulf Coast, the FSEIS concluded that the pipeline wouldn’t increase exports of crude oil or refined products to Europe.

In other words, while Keystone XL may have an impact on climate and the bottom line of tar sands producers, it has little relevance in the policy discussions surrounding the Ukraine. However, it does play a significant role in the debate around U.S. and Canadian climate emissions. And as both Secretary Kerry and the Pentagon have highlighted, climate change poses one of our country’s most pressing national security threats. This view has been mirrored by a number of high-profile military voices who have rejected Keystone XL as counter to the needs of the public and U.S. military preparedness, including:

The reality is that the only tried and true means of reducing our dependence on a volatile global oil market is by reducing our dependence on oil through greater efficiency and alternatives. And the U.S. has already made significant strides in that direction, decreasing its crude oil consumption by two million bpd since 2005. Policies including the recent CAFE auto-efficiency standards adopted last year are forecast to reduce U.S. oil consumption by a further 3.1 million bpd by 2030, saving consumers over $1.7 trillion and supporting advance vehicle manufacturing jobs.

Purported energy security benefits from Keystone XL are a mirage. In fact, the tar sands pipeline would only exacerbate one of the nation’s most pressing national security threats – climate change. Lawmakers serious about shoring up U.S. national security should consider adopting policies that reduce U.S. dependence on the global oil market and build a bridge toward the clean and sustainable technologies of the future.

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Comments

VolpeApr 3 2014 07:17 PM

America is in 2nd place behind China in greenhouse gas emissions. Together this account for about 44% of the global emissions and Canada contributes 1.6% of which oil sands is 2% of that.

Before you wave your enviro flags have a good look at California's heavy crude that makes the oil sands seem pristine in comparison. While you are at it look at the Venezuelan crudes too.

I think all oil exports to the United States should be stoppped immeidately then tell your fellow Americans why they are out of work and why gasoline is so expensive. Put away your SUV's and pull out your horse and carriages.

I hope one day you get a real job to enlighten yourself on the world around you.

Peter BreedveldApr 4 2014 02:12 PM

Your article ignores two basic facts about the economic nature of oil. Oil is a fungible commodity and it is price inelastic.

Fungible means one barrel of oil is easy to replace with another barrel of oil. So oil produced an exportable from Alberta has the same effect on prices as oil produced and exportable from Russia. More supply if demand is the same means a lower price (research supply and demand if you don't understand this).

Oil is also relatively price inelastic meaning that demand does not react very much to price. If the price increases people cannot stop driving to work or do much to reduce demand. If on the other hand prices decline people are unlikely to take a longer drive to work or the grocery store. Since the price of oil has relatively little effect on demand a small oversupply of oil will result in a large drop in prices and a small shortage will result in a large increase in prices. Therefore even though the oil sands only make up a few percentage of global oil production withdrawing the oil would result in huge price gains which would help Russia and increasing the production will result in huge reductions in prices which would hurt Russia.

This effect can be seen in history. Hurricane Katrina resulted a few million barrels a day of production stopping and prices soared after that storm. In the mid 1980s the world had a surplus of oil production and prices went down to $10 per barrel. This price inelasticity is why the oil industry is so prone to booms and busts and it is why the few million barrels extracted from the oil sands is so important to keeping prices of oil affordable and decreasing Russia’s economic might.

Anthony SwiftApr 4 2014 04:14 PM

Peter: The Keystone XL environmental review is predicated on the assumption that the additional crude from the project will not increase supply on the global market, but rather would lead to decreased production from producers of global balancing crudes– and Russia is not such a producer.

If you are correct that KXL will lead to the burning of more oil on the global market, State would then have to take a look the carbon emissions from that increase in global oil consumption. State found the total annual emissions from Keystone XL would be 168 million metric tons – or the equivalent to the emissions of 35.3 million cars in the course of a year.

While short term supply disruptions can create price shocks in the global market, anticipatable developments – like the decision whether or not to build infrastructure to expand tar sands production – provide sufficient time for producers to react and compensate.

jan freedApr 4 2014 07:11 PM

As you pointed out, there are many good reasons to say "no" to Keystone.

It will not create the jobs claimed* for it, nor will it reduce prices at the pump. In fact, prices may go up as domestic oil finds easier ways overseas.

It threatens drinking water supplies.

But most importantly, the IEA estimates that Keystone could harvest 3 times the carbon that would take us over 2 degrees C, the absolute limit for a catastrophe we might survive, if we're lucky.
And other carbon projects are in the wings, taking us up to +6 deg. C, with "massive climate change and irreparable damage" How reckless can we be?

See: "IEA acknowledges fossil fuel reserves climate crunch"
http://priceofoil.org/2012/11/12/iea-acknowledges-fossil-fuel-reserves-climate-crunch/

We are warned of this climate abyss by our most trusted messengers, such as NOAA, NASA, every scientific academy, such as the Royal Academy of UK (SIr Isaac Newton was president), the National Academy of Sciences (Einstein was a member), the very conservative World Bank, fact-checked by National Geographic, Scientific American.
We are told of current disastrous health effects by the 
American Academy of Pediatrics, the World Health Organization and the AMA.

We cannot rely on State Department assessments, if made by employees of the carbon industries.

And Keystone could eventually strip forests the size of Florida, forests that might have absorbed enormous quantities of CO2 before they were removed as "overburden".

Would Keystone "replace" those forests? They've say they would make good any future
damage. Laughable.

Even 2 degrees itself may be too high - a "prescription for disaster"
says Dr. James Hansen, chief climatologist at NASA (ret.), one who, early on, predicted many of the catastrophic effects that we have seen.

Other impacts of Keystone XL are described here,
http://thinkprogress.org/climate/2014/01/31/3231991/keystone-national/

Many of us know the bitter taste of the weird weather out there, with just current warming of .8 deg C. Recent consequences over the World and the U.S. are tallied here:
http://www.climatehotmap.org/
http://www.pinterest.com/climateimpacts/

Shall we roll the dice for our kids and grand kids, saying "let it ride!" beyond 2 degrees and more? More, and we might invite abrupt, irreversible changes.

No, taking your kids to to soccer practice or Disney World does not make up for that.

With its high risks and low return, Keystone XL is not a smart gamble.
------*
*jobs http://www.ilr.cornell.edu/globallaborinstitute/research/keystonexl.html
A recent State Dept. study said the construction workforce would be 5,000 to 6,000 workers. And once the construction phase ends, almost all of these jobs, however many are created, would go away.


A Proud CanadianApr 4 2014 11:42 PM

Other than displacing Venezuelan (and Saudi) heavy crude ….. which the Keystone XL will, your first paragraph is mostly true (refreshing). And of course your “fuel to the fire” conclusion is completely wrong.
On and on you go again about how Canadian oilsands will increase climate change significantly when the FSEIS said it won’t. You obviously read it with some sort of skewed point of view. I have also provided proper information and context in previous comments on your blogs. Others can read them and make their own determination.
A new point that I’d like to make refers to what you claim near the end of your article…. ““The reality is that the only tried and true means of reducing our dependence on a volatile global oil market is by reducing our dependence on oil through greater efficiency and alternatives.” That is the ONLY way. Stopping supply only drives prices up with very serious ramifications to the world economy. Remember $148 oil and the 2008 crash?
“ And the U.S. has already made significant strides in that direction, decreasing its crude oil consumption by two million bpd since 2005. Policies including the recent CAFE auto-efficiency standards adopted last year are forecast to reduce U.S. oil consumption by a further 3.1 million bpd by 2030, saving consumers over $1.7 trillion and supporting advance vehicle manufacturing jobs.”
That 2 million bpd came just from demand destruction as a result of the 2008 crash. As for your projections to 2030 …. Let’s hope they are right.
Purported energy security benefits from Keystone XL are not a mirage. In fact, the pipeline would not exacerbate one of the nation’s most pressing national security threats – climate change (proven out by the FSEIS report). To repeat, the energy security benefits come from displacing OPEC oil (plenty of it more CO2 intensive than oilsand). Currently the US imports about 7 million bbls per day of oil. Perhaps domestic production can take that down to 5 million bbls per day. Canadian imports and further demand reduction through the advancement of renewables (perhaps that 3.1Mbpd you reference earlier) would completely close that gap. And again …… with no increase in CO2 emissions.

A Proud CanadianApr 4 2014 11:51 PM

jan,

It looks like you've bought in to the rhetoric and misinformation connecting the Keystone to all of the worlds climate change woes. I've replied to Anthony's blogs before on this. Perhaps have a read of them.

One thing that doesn't get raised much is the topic centered around your comment
"And Keystone could eventually strip forests the size of Florida, forests that might have absorbed enormous quantities of CO2 before they were removed as "overburden".
Would Keystone "replace" those forests? They've say they would make good any future damage. Laughable."

A common misconception is that although the oil sands encompass a large area, a small amount of that is mined (where forest stripping occurs). Almost all of that is retrieved using underground steaming techniques like those used in the California heavy oil industry.
So many make the false connection. Hopefully this helped.

A Proud Canadian

JakeApr 5 2014 09:34 AM

Thankfully, a full two thirds of Americans support Keystone XL, including 51% of Democrats. I'm not confident that XL will get built, but at least the vast majority of Americans are not buying into the Sierra Club's deceit.

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