The crashing price of oil has affected everyone who buys or sells the stuff (so pretty much everyone) and every industry and project even tangentially associated with the resource in a lot of interesting ways, and the Keystone XL pipeline is no exception. While the new Congress is busy setting up a showdown with President Obama over Keystone, it’s worth taking a look at how sub-$50 per barrel oil will affect the project. The FT reports:
[I]nstead of ending the arguments over Keystone, falling crude prices are stoking the controversy. When oil prices are low, the reduced transport costs provided by a pipeline, as opposed to the alternative of moving the crude by rail, become even more important to the industry.
Transporting oil by pipeline, as opposed to moving it by rail or truck, is a lot cheaper and much more efficient. It’s also generally safer—though greens don’t like to hear it. So, while low oil prices threaten the profitability of Alberta’s oil sands operations, the Keystone pipeline could keep the crude flowing.Don’t make the mistake of thinking that this makes Keystone culpable in the emissions generated from the production and consumption of that Canadian crude, though. Many of these oil sands projects will be going forward, Keystone or not, low prices or not, simply because so much money has already been invested. Keystone isn’t exactly a necessary piece of infrastructure—hence why oil sands emissions can’t be pinned on it—but it is the option that makes the most sense.The CFR’s Michael Levi concludes a much more detailed run-down of the situation (that you should take the time to read in full) by putting the recently stoked debate over the pipeline in proper perspective:
[B]oth the climate damages and the economic benefits from Keystone XL are small in the grand schemes of climate change and the U.S. and global economies. A Keystone XL decision will have much larger consequences for U.S. politics, U.S.-Canada relations, and perhaps the broader rules-based global trading system than it will for climate change or the economy – and that’s where serious decision-makers ought to mostly focus. Lower oil prices haven’t changed any of that.
And so here we are, watching Congress and the White House butt heads over a project that in economic and environmental terms doesn’t deserve the attention that has been heaped upon it.