Monday, May 27, 2013

The Keystone XL Pipeline Scenario

Kaushik Rao is a political theory student at Johns Hopkins University working on capitalism and ecology.

Last year, oil companies such as TransCanada, Valero, and others pushed for the completion of the Keystone XL oil pipeline. The Keystone XL pipeline would carry heavy crude oil from the Alberta tar sands in Canada, through several Midwestern U.S. states, and down into the oil refineries of the Gulf of Mexico. Since the pipeline crosses the U.S.-Canadian border, it is an international project and therefore needs to be approved by the State Department and the White House Administration. A decision on the approval of the permit to build the pipeline is expected by July. The United States government needs to prevent construction of the Keystone pipeline because it would have extremely negative consequences for America on economic and environmental grounds.

One of the main sources of pressure to approve the pipeline is the oil lobby’s marketing campaign that aims to convince Americans that increasing domestic oil production will decrease gas prices here in the U.S. But the fact of the matter is that increasing domestic oil production does not decrease oil prices. Those in the oil lobby that argue for increased oil production in the U.S. conveniently neglect to mention that oil is a globally traded commodity that is highly manipulated by the Organization of Petroleum Exporting Countries (OPEC). Oil markets do not act in the same way that markets for other commodities do, such as corn and steel. The OPEC cartel controls the supply of oil in the world at any one time by increasing or decreasing its production.

The U.S. is left with two scenarios: 1) America starts to buy less oil from foreign countries, which results in OPEC cutting production to decrease the supply of oil which increases prices. 2) America increases its own domestic production of oil to the point where it no longer needs to import oil. This would also be met with subsequent cuts in production by OPEC which would keep world oil prices high. In both scenarios, Americans will be left paying the higher OPEC price because American oil companies would rather export at the higher OPEC price than to sell the oil domestically at the lower U.S. price.

This brings us back to exactly why the Keystone XL pipeline will not help the U.S. economy. If the pipeline is built, American refineries will be pumping out more refined oil than ever before. But this will not increase the supply of oil because of the anticipated cuts in production by OPEC, and thus will not decrease the price of gas in the U.S. If anything, the pipeline would increase the price of gas in the United States because the Keystone pipeline is first and foremost an export pipeline. It would divert oil from the Midwestern states and send it to the Gulf of Mexico where it will then be sent overseas. Since Midwestern refineries would have less oil to work with, gas prices will be expected to increase in the region if the pipeline is built.

The oil lobby also argues that the Keystone pipeline will bring 20,000 permanent jobs and 118,000 “spinoff” jobs to the United States. But this study was entirely funded by an amalgamation of oil companies and thus cannot be fully without bias. In an audit of the same study by the State Department, it was found that the Keystone pipeline would only create 5,000 temporary jobs for two years and at most 20 permanent jobs. Furthermore, the Keystone pipeline would destroy countless more jobs because of spills and leaks from the pipeline. The portion of the pipeline that has already been built has experienced 14 leaks to date. Each of these leaks destroys farmlands and businesses which are then required to shut down which in turn eliminates jobs. 

Exxon pipeline spill in Arkansas, 2013

The Keystone pipeline will have disastrous effects on the United States and will increase the world wide greenhouse gas effect. The type of oil that would travel through the Keystone pipeline is called bitumen, which is a tar-like type of oil. Since bitumen is extremely viscous and flows slowly, it needs to be diluted with natural gas and other hydrocarbons. This diluted bitumen is highly corrosive to pipelines because of its high sulfur concentration, and its high viscosity which increases the friction and temperature inside pipelines. Thus, Keystone XL will be highly susceptible to oil pipeline ruptures which will cause environmental disasters. Another issue with diluted bitumen is that federal regulations are currently not stringent enough to monitor what types of chemicals are added to the oil during the transportation process. In a traditional oil spill, some of the oil can be skimmed off the top of water. But in a diluted bitumen oil spill, the chemicals make the oil heavier which causes the bitumen to sink to the bottom of rivers as we saw in the Mayflower Exxon Mobil oil spill in Arkansas. 

Exxon pipeline spill in Arkansas, 2013

Current greenhouse gas effects have already been the cause of extreme weather events such as Superstorm Sandy which inflicted nearly $80 billion in damages and cut 86,000 jobs from the United States. Burning the recoverable tar sands in Alberta will increase the Earth’s temperature by a minimum of 2 degrees Celsius. The increase in greenhouse gas emissions from the Keystone pipeline will contribute to climate change and create more severe weather events just like Superstorm Sandy which will ruin our nation’s infrastructure and destroy hundreds of thousands of jobs in the future. And this pipeline will lock the United States into an expensive and environmentally harmful form of energy for decades to come.

America needs to move away from an economy that is so dependent on oil, which is a job-killing course. Alternative energy is the future and the U.S. government needs to invest more in its development of different types of energy sources such as wind and solar power. They will create far more permanent jobs and support the future of an economy built around sustainable energy. The money that we as a country put in to develop alternative energy sources will be paid back many times over in the forms of new jobs that can’t be outsourced and through less frequent extreme weather events which will reduce the damage to our infrastructure. Oil is the past. Blocking the Keystone pipeline is the first step towards preventing damage to our country’s future.



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