Dear Media – Give Your Readers the Facts on Gas Prices and Keystone XL

from Wildlife Promise

In response to industry advertising and media reporting of tar sands pipeline Keystone XL’s purported benefits, NWF today sent this memo to media to urge them to put the facts ahead of spin on the effect that the pipeline would have on gas prices here in the U.S.  

 

TO:                         Editorial and Opinion Writers

Photo from "Images of Money" on Flickr Commons.

FROM:                  National Wildlife Federation

SUBJECT:         Energy Prices will Rise in Many States with Keystone XL

DATE:                    March 1, 2012

In the last six months the Keystone XL tar sands pipeline has increasingly been used by politicians to score political points in the broader debate about the future of American energy policy. MSNBC had a piece yesterday that exposed the misinformation behind the political games. Your readers deserve the facts as well. This memo tackles one of the many questions surrounding the pipeline: if built, what effect will it have on gas prices?

Before we get started, a couple of background points: The company behind Keystone XL (or “KXL”) is called TransCanada Corporation. The oil that would be pumped through KXL would mostly come from the tar sands region of Alberta, Canada, and would transport the oil 1,700 miles to Gulf refineries in Texas. It’s higher in pollution than conventional oil and carries a heavy environmental cost. Tar sands are a mixture of sand, clay, water, and bitumen, a viscous type of oil that must be diluted before it can be pumped through pipelines. Bitumen is more corrosive on pipelines than conventional oil and it is more toxic and harder to clean up in the event of a spill, as proven by the devastating spill of over one million gallons into Michigan’s Kalamazoo River.  It also requires special equipment to refine into usable gasoline or diesel.

REROUTES SUPPLY

Contrary to industry spin, Keystone XL would not increase oil supply in the United States. Several pipelines already run from Canada to refineries in the U.S. that service America’s Midwestern states.  The Department of Energy has concluded that there is already enough excess pipeline capacity to carry all the oil Canada can produce for the foreseeable future. What Keystone XL is really about is getting the oil to the port refineries on the Gulf Coast, and the vast profits oil companies stand to make by refining their oil and pushing it to the international market. That’s why so many call Keystone XL an export pipeline, and why the industry resisted a Congressional effort to require the oil stay in the U.S.

Oil companies and Canadian officials have said the biggest factor holding down the price for Canadian crude is also the most basic—they need a way to ship their product overseas and get around an oversupplied U.S. and Canada. Demand for oil in the U.S. has been declining in recent years, while Canada’s oil production is growing.   Keystone XL isn’t about U.S. energy security, it’s shipping oil to  Europe, Asia, and South America, thus driving up the price for Canadian oil. Yes, there’s hard proof, read on.

HIGHER PRICES IN 15 STATES

In this case, the Midwestern markets that are already using tar sands oil would get burned. Consumers in the following states would pay more at the pump: Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, and Wisconsin.

Ask yourself, would oil companies don’t spend $7 billion on a project because they want to lower prices?  They want higher profits, and they are going to get higher prices because they can charge more for their oil. TransCanada’s shipping partners (Valero, Shell, Total Energy, Canadian Natural Resources, Trafigura, and Cenovus/Encana) want to be able to boost prices in the Midwest.[i]

OIL COMPANIES CAUGHT

And now the incontrovertible evidence:  TransCanada has confirmed that high prices are all part of the plan. In filings with the Canadian government, the company asserted that “Access to the [U.S. Gulf Coast] via the Keystone XL Pipeline is expected to strengthen Canadian crude oil pricing in [the U.S. Midwest” and “The resultant increase in the price of heavy crude is estimated to provide an increase in annual revenue to the Canadian producing industry in 2013 of US $2 billion to US $3.9 billion.”[ii] TransCanada has admitted to reporters and to Congress that Keystone XL will raise gas prices in the Midwest, even though politicians love to claim that it will instead reduce prices.[iii]

An independent analysis of Keystone XL (done by Cornell University’s Global Labor Institute) found that “consumers in the Midwest could be paying 10 to 20 cents more per gallon for gasoline and diesel fuel. These additional costs will suppress other spending and will therefore cost jobs.”[iv] And Philip Verleger, a respected economist and oil industry market expert, determined that the project would let TransCanada and Canadian oil producers manipulate Midwestern gas prices to the tune of $500 million annually.[v] KXL’s backers have often touted its supposed “energy security” benefits, but Keystone XL isn’t about energy security.  TransCanada beat back an effort in Congress to keep Keystone XL’s oil off the international market,[vi] because they know they can boost prices and profits by finding new customers overseas.

Again, it all comes back to exports, and it’s revealing to look at what the industry is already doing: Gasoline exports have actually tripled in the last year to 600,000 barrels per day, even though gas has increased by 42 cents a gallon in the same time frame.[vii]  America is becoming the middle man in the global oil business – drilling and importing lots of crude oil but exporting more and more refined diesel and gasoline products.  The U.S. inherits the risks, and gets no reward. To us, it sounds like a sucker’s deal.

[Editor's Note:  This article was primarily written by NWF staffer Peter LaFontaine, with editing by Tony Iallonardo.]