New report: Keystone XL will undermine U.S. energy security

NRDC and Oil Change International released a report today showing that the proposed Keystone XL tar sands pipeline would undermine U.S. energy security and increase the price of Canadian crude. Canada doesn’t produce enough crude to fill the pipelines it already has. In fact, crude export pipelines to the United States are currently running half empty. That means that another pipeline isn’t going to bring more oil into the United States – it’s just going to take the oil that was already coming to a different place. Keystone XL will take oil from the Midwest to the Gulf Coast – where it can be sold on the international market where the price for many petroleum products is higher. Exporting Canadian crude at higher prices on the world market may increase profits for the tar sands industry, but it undermines U.S. energy security and increases prices for American consumers. True energy security and economic progress for the United States can be achieve by developing advanced car and clean energies technologies. This route takes us to millions of new jobs and clean air benefits, making our nation a leader in the international clean energy market.

Here is a summary some of the report’s findings:

Keystone XL will not bring additional oil into the United States. Existing crude pipelines from Canada are half empty right now. Canada doesn’t produce enough oil to fill them and isn’t expected to for more than a decade. If Canada had more oil to send to the United States, it would already be doing so.

Keystone XL is a pipeline through the United States, not to it. The vast majority of Canada’s export pipelines go to refineries in the U.S. Midwest. These refineries sell gasoline, diesel and motor oil to American consumers. Keystone XL will divert up to 830,000 barrels a day of oil from the Midwest, sending it instead to the Gulf Coast and the international market.

Gulf Coast refineries have tax incentives to sell refined products to international customers. Refineries in the Gulf Coast are engaged in an active export business – they sell more than 2.2 million barrels of refined products a day to the international market. That’s almost three times as much as Keystone XL would carry at full capacity. In fact, because these refineries are located Foreign Trade Zones, they won’t have to pay U.S. duty taxes if they sell to foreign customers.

Keystone XL will increase Midwestern oil prices. In the Midwest, American consumers are the primary market for refined products. Keystone XL will draw Canadian oil away from the Midwest and give it access to the international market in the Gulf – and the international price for many refined products is significantly higher than the U.S. price. TransCanada has acknowledges this, estimating that Keystone XL would increase the price the United States paid for Canadian crude by between $2 billion and $3.9 billion a year.

Canadian oil doesn’t protect the United States from oil shocks. Canadian oil production has no spare capacity – if something happens abroad to increase oil prices, Canada can’t turn the tap to increase U.S. oil supply. As the Canadian government has stated itself, it takes the global price of crude oil, it doesn’t make it. The only way to insulate the United States from the vagaries of unstable oil producers is to reduce its reliance on crude oil.

Clean energy technologies can put Americans back to work and provide real energy security for the United States. Over the next twenty years, the United States could reduce its oil consumption by 5.7 million barrels a day by adopting an Oil Savings Plan. These policies simply promote technologies that exist today – adopting measures to build more fuel efficient vehicles, better community planning and public transit, and using cleaner fuels. These would save U.S. consumers could save over $200 billion a year while putting American back to work manufacturing solutions to high gas prices and unstable oil markets.

About the Authors

Anthony Swift

Director, Canada Project, International program

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