The Keystone Pipeline

 The Keystone Pipeline

By the Numbers.

The Keystone Pipeline is making the news again, as President Biden signed an executive order revoking the permit to continue building it.  This is a working document, and if anything in it is in error, feel free provide sources and I'll update it.

To the immediate praise of environmentalists and dismay of Republicans everywhere.   But what is really happening here?

First, I am for infrastructure improvements as a general rule.  The more infrastructure, the better the overall economy.  I am not against the pipeline for what it carries.  I recognize that Biden signed this order on the surface to appease the environmentalist wackos supporting the Democratic left wing.  And, contrary to the Republican meme generators, It is not 28,000,  or 11,000, or even thousands of unionized jobs have not been axed.  About a thousand maybe.  Split between Canada and the US. For a couple of years, then they will be gone as the pipeline is completed.  Long term maybe few hundred permanent jobs for Texas Oil Refinery workers, and an unknown number of Canadian drillers.  But not "Thousands".

But Presidents rarely do things for just one reason and we are going to delve into the numbers about that.

When first proposed in 2008, the price of oil had spiked to over $150/barrel.  Gas pump prices were over $4 in most of the country, and over $5 in California.

Both the US and Canada have huge deposits of oil in the form of shale oil.  The price to extract shale oil ranges from $56/barrel to $75.  So unless the price of oil is over $56+profit margin, the extracting shale oil is not going to happen.  

As of this writing the price of a barrel of oil is $53, but that is Brent "Sweet" crude, easily refinable.  Western Canadian Select is defined as a "heavy sour blend" of crude oil and is currently $40/barrel.  

Therefore, this pipeline will be of no use unless the price of oil goes well above $75/barrel.  

There is already an crowd decrying the price of gas reaching $3 a gallon, and this would be the answer to mitigating it.  But this pipeline will not do that.  It may prevent $4/gallon, but its usage presupposes that we are already at $3 a gallon.

So when this pipeline was proposed, it made economic sense.  More oil in the system can only help lower overall prices.  The Law of Supply and Demand is in effect.

Lets look at who benefits from this pipeline?  Canada is #1.  She is a good neighbor, and I am OK with that.  Texas refiners.  They are Americans, I am OK with that.  A couple of corporations, a couple of shipping companies.  

Who suffers?  Everyone in the path of the pipeline, everywhere there is a leak.  Air and water quality as the methodology of extracting shale oil is not just expensive, it is the most environmentally toxic way to extract oil.  And, if we are extracting shale oil, the price of oil is all ready above $75/barrel.  

The US has been consuming between 18 and 21 million barrels of oil, every day, for about the last 20 years. Source: https://www.statista.com/statistics/282716/oil-consumption-in-the-us-per-day/  The peak was in 2005 at 20.8, and has held steady to around 20.4 in 2019.

This is against a domestic production of around 12 million barrels.  The difference is made up mostly (4.4 million) by Canada, with Mexico, Arabia, Russia, Colombia and Nigeria distant 3rd's.  

Overall, our oil needs are dropping very slowly, which further fills the world wide glut in oil.  

My opinion is that this pipeline is a boondoggle and will never be used once completed.  As cars become more electric, our need for oil will be reduced.