Amid the chaos in Ukraine and the debate over how to respond, if you listen closely you can hear the din of another, seemingly unrelated debate: the one over the Keystone XL pipeline. Such conservatives as Sarah Palin are increasingly using Russia’s incursion into Crimea as a way to bludgeon President Obama for his failure to approve the pipeline that, if built, would bring 830,000 barrels a day of heavy crude from Western Canada into the U.S.
Their logic goes something like this: If Keystone were approved, the U.S. could further reduce its imports of oil from hostile, unstable parts of the world and begin exporting oil to Europe, which currently relies on Russia for about a third of its crude supply. In turn, that would serve to lower oil prices by bringing more of it to market (instead of leaving it stuck in Alberta’s tar-sands), which would ultimately be bad news for Russia’s petro-based economy.
This argument is tenuous at best—one that relies on some broad assumptions that, even if they do come to pass, are years down the road. At worst, it’s a politically motivated simplification of a complex issue that will have next-to-no impact on the fortunes of Russia or Europe. In other words, it’s wrong.
In theory, approving Keystone XL would allow the U.S. to further reduce imports of heavy crude from places such as Venezuela, further aligning the U.S. with Canada, the biggest source of U.S. oil imports, in a North American-based energy trade whose oil and gas flow north and south on pipes and trains instead of east and west on tankers and ships.
For every barrel of Canadian crude that Keystone would bring to the U.S. Gulf Coast, that is one more barrel of crude displaced on the world oil market. Would that lower oil prices? Not necessarily. For one, Keystone would move only 830,000 barrels of oil a day. The world uses about 92 million barrels a day. Increasing the supply by less than 1 percent isn’t going to do much to prices.
If anything, Keystone would more than likely raise the price of heavy crude in Canada because oil that’s trapped isn’t worth as much as oil with an easy path to market. Just look at what prices for West Texas Intermediate did when millions of barrels of domestic crude were stuck in Cushing, Okla., in 2012.
The idea that any of that new Canadian crude would make its way to Europe is a non-starter: the U.S. is banned from exporting crude oil. Approving Keystone doesn’t change that. So might Keystone cause U.S. refiners in the Gulf to export more refined fuel to Europe? Perhaps, but they’re doing that already. As of December 2013, the amount of refined petroleum products exported by the U.S. to France, Germany, Italy, Spain, and the U.K. had increased by more than 400 percent vs. 12 months prior.
Finally, even if President Obama were to approve Keystone tomorrow, construction wouldn’t be completed until about 2016. That’s no solution for the current situation we face in Ukraine.
Instead of focusing on Keystone, Palin and pro-energy conservatives should be talking about the U.S. exporting natural gas. Europe gets 40 percent of its natural gas from Russia, almost all of which flows through Ukraine. There’s a very good case to be made for the U.S. to use its new-found natural gas abundance as a way to blunt Russia’s control over Europe’s (and Asia’s) natural gas supply. The problem with that argument is that it lacks the political firepower that a pro-Keystone attack line carries because the Obama administration has approved five liquified natural gas export facilities in the U.S. over the past year—a total of six since 2010. Combined, they account for about 9 billion cubic feet per day of export capacity.
Could more be done? Certainly. The Department of Energy is currently weighing 24 additional applications for LNG export facilities. But the administration is far from stymieing the effort.
There are lot of reasons to approve Keystone, (and plenty more not to) but to argue that going ahead would help save Europe from Russia’s grasp isn’t close to being one of them.