Arguments
President Obama's climate leadership faces the Keystone XL challenge
Posted on 18 November 2014 by John Abraham
What a change a few years makes. For those of us concerned about climate change, seven years ago marked a low-point. It was a time where no meaningful actions had been taken to reduce carbon pollution and prepare our nation and the world for the threat of global warming. Now, we celebrate a series of major plans and actions that have the potential for helping us avoid the worst climate risks.
These past years have cemented Obama’s legacy as a climate-aware president. They have also cemented the opposition (as if more cement was needed) as either too weak-minded to understand basic physics or too cowardly, favoring political expediency over the fate of future generations. This is one of those issues on which history books hinge. This was the time the USA took a leadership role to simultaneously reduce carbon pollution, adapt to the unavoidable changes in the pipeline, and build the energy infrastructure to lead in the future’s energy economy.
What actions has the Obama administration taken? We can remember back to the increase in fuel efficiency standards for passenger vehicles and finalization of standards for commercial vehicles. These standards not only reduce carbon emissions but they lower costs to consumers and preserve the valuable resource petroleum.
Perhaps the most significant actions taken by the administration deal with pollution from existing and new coal power plants. The Environmental Protection Agency has developed a Clean Power Plant to reduce power-plant emissions. The plan allows flexibility in meeting emission reductions reflecting different conditions and power-portfolios across the country.
The administration has set forth an international agreement to reduce very potent greenhouse gases called hydrofluorocarbons. This agreement was exciting because it gave lie to the idea that USA action would put as at an economic disadvantage. What this agreement showed is that when the USA acts, other countries follow.
That point was powerfully made last week. China and the US announced a hugely important agreement to bend the curve of emissions, and quickly. Under the agreement, these two countries will dramatically increase their share of renewable energy production, a move that is expected to further increase employment in this future sector. For the US, this means approximately 27% reduction in carbon pollution by 2025. This action now puts pressure on other major polluters, in particular Canada, Australia, India and Brazil.
Additionally, the US has worked to modernize our electrical grid to increase energy efficiency and facilitate a more sensible mix of power generation sources in the future. The USA has also announced contributions to an international fund to spur developing world integration of clean energy.
All of this culminated at the recent G20 summit in Australia. Other countries have seen how quickly action can happen, particularly when the world’s two largest emitters are in agreement.
Of course President Obama’s role isn’t over. One issue still hanging over his presidency is the Keystone XL pipeline. A pipeline that, if approved, will increase exploitation of the world’s dirtiest fuel, will actually raise gasoline costs in the USA, and will result in the wrong signals for the future energy market. I certainly hope he will stop the pipeline and ensure his legacy. It would be a real shame if, after all his excellent actions, it is the pipeline he is remembered for.
How exactly does increasing the supply of crude to the US and lowering its transportation costs (pipeline vs. railcar) result in higher domestic prices for refined products?
And correct me if I've misunderstood something here, but isn't the "Green" plan precisely to raise gasoline prices in order to reduce consumption and GHG emissions?
Russ... May I ask, is this going to just be another driveby comment or are you going to stick around and discuss the issue?
Rob,
That entirely depends on the nature and quality of responses.
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Russ... Okay, first off, there isn't a "green plan." That would be an ad hom comment. A carbon tax would raise the price of fossil fuels by accounting for externalities, which was even an idea promoted by Milton Freedman (who could hardly be labeled a "greenie").
It's my understanding that the oil that would be processed as a result of the KXL is intended for export markets, not the US. It benefits oil companies (particularly Koch Industries) a great deal. The net benefit for the US is nominal. Some short term construction employment and that's about it. The impact on increased carbon emissions is significant.
It's abundantly clear that oil reserves need to stay in the ground. KXL is another step in the wrong direction.
If you want to refresh your memory about the history of the proposed Keystone XL pipeline and related matters, check out this reader article on North America's biggest energy and climate fight.
Keystone XL Pipeline: Everything You Need to Know in 23 Stories by By Stacy Feldman, InsideClimate News, Nov 18, 2014
Russ R.
The Keystone crude is all earmarked for Latin America and Europe and not for the US.
Also, according to a number of sources, including Cornell University and Consumer Watchdog, the pipeline will cause the rerouting of oil destined for midwest USA and that will raise prices of gasoline, esp for the midwest.
The impacts that the mining of the Athabasca tar sands are having on Aleberta's ecosystem is elequently presented in:
A Forest Threatened by Keystone XL, Op-ed by Andrew Nikifurok*, New York Times, Nov 17, 2014
*Andrew Nikiforuk is a Canadian journalist and the author, most recently, of the book “The Energy of Slaves: Oil and the New Servitude.”
Rob Honeycutt,
1. Very well then. Given that a carbon tax is desirable because it accounts for negative externalities by raising the price of gasoline and reducing consumption and emissions, and if this claim were true (that the Keystone XL pipeline would somehow raise gasoline prices) then the pipeline would deliver the same outcome as a carbon tax. I'm sure you can appreciate the absurdity of this.
2. "It's my understanding that the oil that would be processed as a result of the KXL is intended for export markets, not the US." Incorrect.
You still need to explain how increased crude oil supply and lower transport costs "will actually raise gasoline costs in the USA". Because this claim defies the most basic laws of economics.
Russ R:
The Globe & Mail article you quote doesn't claim what you assert it does. The passage you cite confirms only that Canadian tar sands crude is priced attractively with respect to refining firms; it doesn't follow that US citizens will benefit in the form of reduced prices at the pumps unless you can also show that domestic US usage is the designated purpose for Canadian tar sands crude. The Globe & Mail article certainly doesn't.
What is more, unless you have some analysis (i.e. of the factors affecting US gasoline pricing) to back it up, you're not in a position to proclaim with any authority that a carbon tax and Keystone XL can't possibly both cause a rise in average/typical gasoline prices in the US (or in individual regions therein).
Russ R--Of course it's going to be refined on the Gulf. That's one of the main reasons to build the line in the first place. But being refined in this country does not mean it will be sold here.
beansformilagro,
"The Keystone crude is all earmarked for Latin America and Europe and not for the US." Evidence?
"the pipeline will cause the rerouting of oil destined for midwest USA and that will raise prices of gasoline, esp for the midwest." This has been addressed and debunked... with EIA data.
But even if it was true... the regional reduction in Midwest crude supply would be offset by an equivalent increase in Gulf Coast supply. The net amount of crude oil supply wouldn't decline... rather, it would increase because the pipeline would extend all the way to Canada.
wili,
"But being refined in this country does not mean it will be sold here."
There's a piece missing in your reasoning. Crude oil is already being refined in the Gulf Coast (which is operating at capacity) and the products are already being sold in the US.
If more cheap Canadian crude flows to the refineries on the Gulf Coast, which displaces expensive Mexican and Venezuelan heavy crude, why should domestic sales of refined products (gasoline and diesel) fall?
The only reason that refiners would ship more fuel abroad is if domestic gasoline prices fell relative to export prices.
Composer99,
I never claimed that US consumers would enjoy lower gasoline prices. In all likelihood, the benefit of lower crude oil prices would go to the refiners, assuming that the marginal unit of gasoline supply is being imported.
John Abraham claimed that the pipeline would cause US gasoline prices to rise... not just Midwest prices... US prices. I'd like to know how that's possible, because the laws of supply and demand don't support that conclusion.
Russ... There's a great deal of support for the position that KXL may likely raise gas prices. Perhaps your analysis of supply and demand doesn't take full account of the economics involved.
Forbes: KXL Won't Lower Gas Prices, It Might Raise Them
Why The Keystone Pipeline Will Actually RAISE Gas Prices In the U.S.
Bernie Sanders Shatters The Big Keystone XL Lie: Pipeline Will Cause US Gas Prices To Go Up
Keystone Oil Pipeline Seen Raising Gas Prices in Midwest: Energy
The Keystone XL pipeline isn’t about lowering your gas prices
Russ @8...
1) These are two different issues. Tax and dividend would account for externalities and incentivize low carbon solutions, while returning the costs to tax payers. KXL is a question of whether to leave reserves in the ground.
2) The Forbes article I cited above addresses issues of refining and export.
Russ seems to have a bone he won't give up no matter how much counter evidence is presented. In the mean time:
Senate Rejects Keystone XL Pipeline By One Vote
So the whole discussion would seem to be moot, for now at least.
And, really, likely moot for another two years since Obama is likely to veto any bill.
Russ R. @11 ...
the IEA data at Macleans you've linked to states " ... the cost of crude is by far the largest cost to a refinery, and there is no question Keystone XL will affect crude oil prices in the US, leading to more expensive crude in the mid continent than would otherwise be the case."
They also continue with a number of contradictory statements where previous massive crude discounts had virtually no discount on midwest oil prices which were 4% higher than coastal prices. They go on to say 'consumers were still paying gasoline prices based on the higher cost production in other areas and export market prices."
It is not a far leap from what Macleans says to see that higher cost crude will mean higher prices to consumers.
Rob@17,
Why are you so sure?
My understanding is: this outcome was short by only one vote (59-41, wheareas 2/3 or 60-40 is needed) but this is Dem controled senate; next year, when new senate sits, it will be Rep controlled, so they will gather required 2/3 more easily.
Then, Obama's veto may not last very long, because according to Veto legislation in US:
which is highly likely in the new congress that we'll inheritt afted recent election. So IMO, the KXL fate is not moot for full 2years, it may be pushed within couple months of next year. Unless my understanding of US legislative process is incorrect in which case please advise me.
Here is why the cost of gasoline will rise in the US Midwest.
Currently most gasoline in Midwest is made from Canadian bitumen (It's NOT oil and I'm not going to call it oil because it is not) and refined mainly in the Chicago area. If the Keystone XL goes through then all that oil will go to Texas and the gasoline made from it overseas which will create a severe feedstock (bitumen) shortage and as the Law of Supply and Demand tells us the price of gasoline will go up
Before you answer "Bakken" or "North Dakota" as a sup[plier that's a no-go because that is real oil and all the Midwest refineries are set up to refine bitumen meaning a complete overhaul and once again the price goes up
It's as simple as that
After the recent elections, President Obama has to thread cautiously and pick his fights. If he vetoes the Keystone legislation, there may still be enough Democrat Senators to join the Republicans in overturning his veto.
As I just read that the current Senate has still voted it down, the clash is going to come in the new year, when the Republican Senate takes over.
If he thinks letting Keystone pass will gain him some advantage elsewhere, perhaps he should approve it. That is what Bill Nye seems to be saying in this interview (towards the end).
Bill Nye Interview
IMHO, the President should still veto the pipeline and challenge the Senate to override it. It will set up the battlelines for 2016, fire up the Democrat environmental base and reinforce the logic behind the US deal with China.
Russ R.:
On what basis don't they? So far all you've provided is your say-so.
The US Midwest is a region, shrinking crude supply in that region would be offset by growing supply in another... the US Gulf Coast.
You're conflating higher prices in one region with higher prices nationwide. That's seriously flawed.
Recommeded reading:
Keystone XL: A Tar Sands Pipeline to Increase Oil Prices by Anthony Swift, Natural Resources Defense Council (NRDC), May 21, 2012
Russ @23... "That's seriously flawed."
I posted 5 articles that say KXL would likely raise prices nationally. That was just the first 5 I got in a google search. There were tons more.
You seem to be applying an overly simplified idealization of economics to the question. There are other issues that come into play relative to restrictions on re-exporting crude oil.
christoz... The vote yesterday was short by one to avoid a filibuster. The 2/3 vote to override a veto would be 67 out of the 100 senators. So, even if they'd gotten the necessary 60 votes yesterday they still would have faced a veto. Next year might be a different matter, but Dems may also close ranks with the new Senate, meaning the 67 votes to override a veto may still not be there.
From wiki: "Senate rules permit a senator, or series of senators, to speak for as long as they wish and on any topic they choose, unless "three-fifths of the Senators duly chosen and sworn" (usually 60 out of 100 senators) brings debate to a close by invoking cloture under Senate Rule XXII."
So, it's 60 votes to stop a filibuster but 67 votes to override a veto.
I'm surprised that in the 27 comments to date no-one has commented on what is probably the major reason the US will develop the XXL pipeline and will increase shale oil fracking. As shale oil production has increased so the US has become less and less reliant on the supply of oil from Saudi Arabia and other OPEC countries and is in fact exporting more oil than some OPEC countries. For decades now the West and particularly the US, have been held to ransom through threats to and manipiulation of oil supplies by OPEC. The US, will not, if it can possibly help it, return to that scenario. That many Americans do not agree with President Obama is shown clearly by the result of the mid-term elections. This quote from USA Today on November 13 2013 is relevant :
"The United States tiptoed closer to energy independence last month when — for the first time in nearly two decades — it produced more crude oil than it imported, federal officials said Wednesday.
The nation has been moving toward this milestone, because two trends are converging. Domestic oil production is at a 24-year high while foreign oil imports are at a 17-year low. The result: production exceeded net imports for the first time since February 1995, although the nation still imports 35% of the petroleum it uses.
Production has been booming partly because of hydraulic fracturing or fracking, which extracts oil by blasting water mixed with sand and chemicals underground to break apart shale rock. Meanwhile, consumption has been falling as high gasoline prices have reduced how much people drive and more efficient cars and buildings have also lowered energy use.
Chrizkoz @19, Rob - Some of the Senate votes for the pipeline will not change even with the new Congress. For example Landrieu (likely to lose runoff) and Begich from Alaska will be replaced by Republicans but both voted for the pipeline.
marcf... Yeah, I think the Republican lead Senate next year will still come up short of the 67 votes necessary to override a veto. And Obama has been taking a much firmer stance on climate change.
I also think that, even though there is popular support for KXL, it's fairly soft support. It's not a pivotal issue for most voters.
Rob Honeycutt, #27
Ok, thanks for that. One Democrat Senator, who is in a runoff (from Louisiana, a state not really affected) broke ranks on this vote because she looks like she will lose her seat. So there is a risk that more Senators will waver, afraid of a voter meltdown in 2016.
But I agree that a veto override is unlikely - thanks for the information.
However, there is always a risk that the Preisdent will bargain Keystone for what may seem an advantage elsewhere.
shoyemore... The Republicans have far more seats in play in 2016 than do the Democrats. The Dems have 10 up for reelection, where the Republicans have 24. [Source]
Recommended reading:
Democrats block Keystone pipeline, but GOP vows new fight when it takes over by Paul Kane and Juliet Eilperin, Washington Post, Nov 18, 2014
Ashton,
What evidence is there that Keystone or fracking were key policy planks motivating voters in the 2014 midterms?
The Republicans will not have 67 seats in the new Senate. And only a delusional Democrat would believe their vote for XL would get them votes in 2016 from 'voters who only care about getting the best possible personal benefit to the detriment of developing a sustainable better future for all'.
So all the Democrat Senators should be an essentially indivisible block like the Republicans chose to be through the past 6 years. That way the only approval of XL comes paired with significant dramatic meaningful curtailing of other 'unacceptable profitable activity'. I would encourage that to be far more significant curtailing of coal burning in the US and curtailing coal sales out of the US than can be accomplished by "Executive Order', along with banning the burning and exporting of Petroleum Coke, a byproduct more damaging than coal resulting from trying to make something conveniently burnable out of the crud from Alberta.
Any approval of XL based on a promise by its supporters to agree to such actions 'at a future date' would be an absurd deal to make given the proven history of those type of people to 'Never accept No' as an answer to their incessent demands to get away with unacceptable unsustainable behaviour.
And here is a Republican supporter (of the old fashioned sensible conservative variety - remember them) who thinks the GOP is in big trouble in 2016; Presidency, House Senate.
Maybe all the policies the Dem's need is 'America Needs You To Vote'. High voter turn-out and the GOP is toast.
"So all the Democrat Senators should be an essentially indivisible block like the Republicans chose to be through the past 6 years."
Unfortunately, that is not always true. In the recent election, Democrats ran away from the President, the healthcare improvements achieved by his Administration, and the improving economy. Again, they allowed the Republicans to write the agenda ("Things are cr*p and everything is the fault of Big Government"), every Democrat fought for survival as an individual and allowed himself or herself to be picked off.
If the Democrats stop being defensive and mount an aggressive campaign for collective action with a simple message, they have much better chance in 2016.
Just to re-inforce my last point:
A Dem Congressman will support the GOP on Keystone to "pave the way" for compromise
Glenn @36,
Thanks for the link. Interesting presentation.
It is unfortunate that the writer did not simply state that the 'different Republican Party' needed to be developed to have a future needs to actually focus on development of a sustainable better future for all life. The Democrats also need to change, just not as much as the Republicans.
The current group behind the Republicans is trying to win through momentarily potentially successful but ultimately unsustainable actions like: appealing for the votes of intolerant people, gerrymandering, tricky voter ID legislation and deliberate mass-misleading marketing efforts. That effort is inevitably leading to damaging future failure.
The appearances of success obtained by those actions and attitudes will ultimately collapse because they are fundamentally at odds with the development of a sustainable better future for all life on this amazing planet.
The population will inevitably become more aware caring and thoughtful, or its society and economy has no future. And as more thoughtful aware and caring people vote based more on their 'thoughtful consideration of all the facts' than their 'selfish impulse of the moment' the people who fight to try to prolong their ability to succeed from unsustainable harmful (unhelpful) actions and attitudes will fail more frequently.
History is full of examples of 'moments of apparent success' by those who only cared about themselves in their time. Humanity only progressed to a better future when those people failed to succeed. And humanity will continue to progress, in spite of the damaging delusions that can be generated in the minds of easily impressed people immersed in a mad mass-marketed consumptive unsustainable chase for an unsustainable 'impression' of success.
Rob Honeycutt @25,
I'm going to take the time to break this down into components, and provide evidence where required. You're welcome to dispute any point, or the reasoning linking them together.
Conclusion:
If the Keystone XL pipeline will result in:
then, the pipeline will not cause the average price of US refined products (i.e. gasoline) to rise.
NB. The above is not an argument that US gasoline prices will fall. In all likelihood, the lower costs of inputs and transportation will result in higher profit margins for refiners, with no significant change in the price at the pump.
This phenomenon was already observed in the Midwest, as a regional glut of crude oil (caused by insufficient pipeline capacity) brought down the price of crude oil but had no impact on retail gasoline prices. Where did all the savings go? To the refiners.
Read about it for yourself: The Incidence of an Oil Glut: Who Benefits from Cheap CrudeOil in the Midwest? Borenstein & Kellogg (2014)
Regarding Keystone XL, the authors conclude:
"The merits of these capacity expansions—particularly the Keystone XL project—have been a matter of public debate on both environmental grounds and the extent to which it will impact U.S. gasoline prices. While this paper is silent on environmental impacts, it does imply that the impacts on gasoline prices will be extremely limited. Because expanding Midwest crude oil export capacity will have only a minimal impact on Gulf Coast and world oil prices, U.S. consumers outside the Midwest will not experience a decline in gasoline prices. As for Midwest consumers, our results imply that capacity expansions that increase the Midwest crude oil price will not increase the Midwest gasoline price. This price is already being set by gasoline refined using Gulf Coast rather than Midwest oil, despite the depressed Midwest oil price. Resolving the Midwest crude oil transportation bottleneck will not affect this situation, thereby leaving Midwest gasoline prices unaffected as well."
Apologies in advance to the Moderator, but I find it difficult to resist responding to Russ R's recent elaborate presentation.
Russ R.,
Please substantively refute all of the following (previously pointed out points regarding this issue that your most recent comment does not address):
Unless you can substantively refute all of the above (and there are more points against what XL would prolong and potentially expand that would have to be refuted), the XL pipeline is not justified. QED
One Planet Only Forever,
Your comment @41 is not in any way a response to my argument @40.
Starting from my first comment in this thread @1, I've been solely focused on a single issue... whether or not KXL will raise gasoline prices in the US, as claimed in the original post.
I'm not discussing other arguments. There are many, many cases to be made both for and against the approval of this pipeline, but at least some of those arguments may be factual.
The claim that KXL will raise US gasoline prices is pure fiction, and I've laid out the facts refuting it.
[JH] You are again skating on the thin ice of excessive repetition which is prohibited by SkS Comments Policy.
Russ @40... May I ask, did you read any of the articles that I posted stating that KXL would likely cause gas prices to rise nationally?
Russ... Here's a study from Cornell.
That 10-20 cents a gallon completely wipes out any gains we achieve from additional jobs within about a year. [LINK]
Russ R.,
The purpose of this discussion is the justification of XL.
There may be other reasons people may 'want' XL but XL is unjustified unless you or anyone else can substantively refute the points I provided. QED
[JH] The first sentence of the SkS Comments Policy reads as follows:
The purpose of the discussion threads is to allow notification and correction of errors in the article, and to permit clarification of related points.
Russ R's commentary about a statement made in the OP is therefore legitimate. He/she is, however, skating on the thin ice of excessive repetition which is prohibited.
Russ R.,
Specifically to your point regarding gas prices in the US.
In addition to the many articles referred to by Rob, here is another reference. It includes the following statements which are consistent with the sales pitches the Alberta Government and other promoters of the oil sands currently continue to proclaim, XL will increase the price they can get for Oil Sand Bitumen which is a key part of the mid-West US refining system.
"TransCanada’s 2008 Permit Application states “Existing markets for Canadian heavy crude, principally PADD II [U.S. Midwest], are currently oversupplied, resulting in price discounting for Canadian heavy crude oil. Access to the USGC [U.S. Gulf Coast] via the Keystone XL Pipeline is expected to strengthen Canadian crude oil pricing in [the Midwest] by removing this oversupply. This is expected to increase the price of heavy crude to the equivalent cost of imported crude. 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.”"
"Independent analysis of these figures found this would increase per-gallon prices by 20 cents/gallon in the Midwest."
OPOF... The other bit I think Russ is missing is the fact that you can't just consider domestic economics relative to supply and demand. The issue is, refiners are going to sell their products where ever they can get the highest price, and any product they sell in the US market is going to be below world price for those products.
That is going to have the effect of pushing domestic prices higher.
Ironically, the Forbes article I linked is written by Tim Worstall, who is a UKIP supporter, and by no means a liberal.
A recent peer-reviewed article argued that, because of basic economics, the extra supply of oil on KXL will lower world prices by $3 per barrel. US domestic prices are, to a large degree, controlled by world prices so, other things being equal, US retail gasoline prices should eventually fall a bit if KXL is OK'd.
I happen to think that this amount ($3/bbl) is too high (my arguments in an SkS post,here), but it is in the right direction. However, the oil market is very complicated and unpredictable and, although you can make predictions of the consequences of a single variable on the basis of everything else being equal, in oil markets everything else never is.
In any case, concerns about future small changes in the price of gasoline have everything to to do with US politics and not that much relevance to sound environmental policy. I'm against KXL for the same reason that Canadian governments and oil companies are in favour of it: because it will promote production from the oil sands.