A Consumer Watchdog report released this morning found that the Keystone XL pipeline will lead to gasoline price hikes in the Midwest and ultimately hurt the US economy. In addition to the overriding environmental and safety concerns posed by the 1,661 mile-long line (which would stretch from Alberta’s Tar Sands to the US Gulf Coast), Consumer Watchdog finds that “US consumers and the overall economy would bear the substantial risks of the pipeline without measurable permanent benefit.”
The proposed Keystone XL pipeline would expand transport capacity to 1.1 million barrels of tar sands oil each day, and come at a cost to investors and TransCanada—the pipeline’s owners—of around $7 billion. With it, the pipeline carries the potential for massive financial rewards on the global market where oil companies will be able to charge a higher price for the Canadian crude oil.
The Consumer Watchdog report underscores the extent to which Keystone XL would fail to serve any practical needs in the US; the IEA estimates that by 2020 domestic US oil production will outstrip that of Saudi Arabia, thus “diminishing any “energy security” argument for a 50-year pipeline that imposes economic, safety and environmental burdens on U.S.”
The primary region to currently benefit from Canadian Tar Sands oil imports (through the existing Keystone pipeline) is the Midwest. The report finds that early this year the Midwest sourced approximately 57% of its oil from Canada, and receives a vital $20-$30 per barrel discount as compared to the price of US Gulf Coast oil. If Keystone XL goes ahead, increases at the pump that “could range from 25 cents to 40 cents a gallon, depending on how regional refineries respond to paying $20 to $30 more per 42-gallon barrel for Canadian crude oil.”
In addition, oil will likely be diverted away from Midwestern refineries putting further strain on consumers at the pump—a move that might be intentional on the part of the oil companies as a basic piece of supply/demand trickery to further raise prices. The overall effect of a 20 cent per gallon increase would be one of diverting $3-4 billion in consumer spending each year that could be spent more productively elsewhere.
In terms of any direct benefit to the US, there appears to be little to counter the substantial risks of such a pipeline. As we encountered with the Exxon Mobil Spill in Arkansas, Tar Sands oil is not “oil,” and, “[i]n the event of an oil spill from the pipeline, U.S. localities, states and federal agencies would pay extra because tar sands crude shippers do not pay into the U.S. Oil Spill Liability Trust Fund.”
Meanwhile the “fleeting benefits of construction jobs, the unprovability of long-term benefits and the negative effect of higher gasoline costs on consumers,” find that Keystone XL is no economic boon to the United States.”