In a bit of bright news for America’s energy future, the southern portion of the controversial Keystone XL pipeline will be completed by the end of this month, connecting Cushing, Oklahoma with refineries along the Gulf Coast. The pipeline will bust open one of the bigger bottlenecks in America’s energy pipelines, allowing 700,000 barrels of oil per day to flow down to the Texas coast. The Wall Street Journal reports:
Investors, traders and analysts in recent weeks have been focused on the race by pipeline operators to catch up with the oil-output boom in the U.S. For almost three years, U.S. oil prices have been depressed relative to world prices and Europe’s Brent crude contract. That has been due largely to a lack of infrastructure, which has caused barrels to pile up in and around Cushing, Okla., the largest storage hub in the Midwest. […]“This is going to add to the drain on Cushing quite a bit,” said John Kilduff, founding partner of Again Capital in New York.
Here’s why this is so important: back in February, we wondered whether the shale boom might go bust, not from a lack of recoverable oil and gas (there’s still plenty underground), but because America’s pipeline infrastructure lacked the capacity to transport oil from fields in the Dakotas down to refineries along the Gulf Coast.This stunted infrastructure wasn’t the result of poor planning. The US has by far the world’s most extensive pipeline network. No one could have predicted the magnitude of the shale boom. But knowing what we do now, failing to shore up these networks would be a big mistake.Of course, we’re still waiting to hear from the Obama administration on whether the northern half of this pipeline will be built, connecting Cushing with Alberta’s oil sands. The White House decision was expected this fall, but now it looks like the President is kicking the can down the road until sometime early next year. The political and economic rationales still seem pretty clear to us: the pipeline should be built. But even if it isn’t eventually built anytime soon, it’s encouraging to see our own domestic transportation network getting some much needed upgrading.There’s still plenty of oil out there. Let’s go with the flow.[Pipeline image courtesy of Shutterstock]