Where Would Keystone XL’s Canadian Oil Go? And Does it Matter?

Since we ran Brian Mann’s piece earlier this week on Canada’s emergence as an energy superpower, we’ve gotten a number of comments and questions on our website and Facebook about the much-debated Keystone XL oil pipeline pipeline proposed for the US midwest. The pipeline would bring oil from the vast oil sands of Alberta (or tar sands, depending on your POV) to refineries in Texas, and Brian used it as a touchstone for a broader look at how Canada has already become the number one supplier of imported energy to the US.

We got a couple of questions online about where the oil from the pipeline would go, from people who have heard that most of it wouldn’t actually be used in the US. It’s one of many hotly-debated questions about the project. Here’s my attempt to answer it, and to look at the bigger picture in which the question is being raised:

First, let’s clarify what we’re talking about, since that picture has gotten even more complicated this week.

Just today, President Obama promised to fast-track part of the pipeline—the southern portion, which would run from Oklahoma to Texas. In the short term, that section would help alleviate a logjam for US oil producers in the region, but for now it wouldn’t carry the disputed Canadian oil that’s at the center of the controversy. For that to happen, the pipeline company TransCanada needs to build the northern segment as well, from Alberta to Oklahoma. That’s the part that’s gotten hung up on environmental concerns and has become the object of so much controversy. Greens content the oil it would carry is especially damaging to the climate, that getting the oil out of the ground is causing widespread local environmental damage, and that spills from the pipeline would threaten critical habitat and water supplies in the midwest.

Pro-business groups dismiss the environmental concerns and say the project would bring thousands of badly needed jobs to the US and help keep oil prices down.

Which brings us back to the question of where the Alberta oil that would flow through the entire XL pipeline would end up.

Proponents contend that this oil will increase US “energy security” and decrease US reliance on other sources of foreign oil. They imply that the oil will go directly into the US market, without actually promising that it will.  Opponents argue that it won’t improve our energy security at all, because both the composition of the oil and the location of the Gulf coast refineries it would serve make it highly likely that the refined products will end up going overseas.

In fact, both may be partly right.  But that just begs a bigger question: What is energy security, and and how does or doesn’t this pipeline help us achieve it?

Bottom line, oil is a global commodity—essentially one big pool.  The full XL pipeline would add more Canadian oil to that pool, and so dilute the share from the rest of the world.  

From the somewhat narrow perspective of short-term energy security, that’s good for the US. Canada is a stable and reliable source, and increased production there would reduce volatility on the global market from what it would otherwise be.  And in the event of a major disruption in other sources, more oil from our neighbors might be diverted into the US market than would otherwise stay here–provided other customers don’t buy it first (whatever else they’re motivated by, the corporations involved in the many aspects of this project are not motivated by patriotism, and aren’t likely to cut any special deals for the US if the market starts to tighten up).

So yes, it might increase our energy security somewhat, but nowhere near the extent that supporters are suggesting.

But it also is likely that most of the actual hydrocarbons that flow through the refineries at the end of this proposed pipeline will end up being burned elsewhere, at least under current market conditions. So on that count, opponents may prove to be technically correct.

Still, the argument that the pipeline wouldn’t help improve US energy security because the oil would go elsewhere is a bit of a red herring.

The global oil market is massively complex, as is the US’s role in it (for instance, we are both an importer AND an exporter), and it generally doesn’t matter where any particular barrel of oil ends up.  Ultimately, prices and availability (“energy security”) are largely a function of global supply and demand.  The oil flowing through the new pipeline would increase global supply and so have a moderating influence on global prices and a positive impact on global availability.

And like I said, that’s good for “energy security,” at least in the short term.

But the more overarching—and more honest—argument against the pipeline is that this kind of short-term energy security for the US is not a good thing for the climate, and so for the country in the long-term.  

As I said above, narrower criticisms have been leveled against the oil/tar sands project, including its extra-high carbon footprint and its massive local environmental impact. But the underlying argument against it, and against any pipeline that would make more of Alberta’s huge petroleum resources available, is that these will just help maintain our global addiction to oil, much like offering another fifth of whiskey to an alcoholic who’s promised to go on the wagon.

Bottom line, supporters are right—Keystone and Alberta’s oil will help keep global oil prices lower than they’d otherwise be. But opponents quietly mutter that that in itself is a bad thing, because lower prices will only encourage consumption, discourage investment in alternatives, and so increase greenhouse pollution.

But that’s a politically much tougher argument to make—that we should stop the pipeline in order to help put the squeeze on global oil supply and prices. Whatever our beliefs about climate change and appetites for higher-mileage cars, most Americans are still nowhere near ready to accept the argument that we should pay higher energy prices for the good of the environment. So perhaps it’s understandable that many greens are casting about for other ways to press their case against Keystone, like the “it will just funnel the oil to other countries” argument.

Ultimately, of course, the best way to ensure energy security is to use as little of it as possible. Next is to make sure that as much as possible of what you do use comes from domestic, low-impact, renewable (that is, unlimited) sources. Both of which are precisely the same things that will cut both the global and local environmental impacts of burning fossil fuels. So you’d think that reasonable folks who are concerned about energy security could come together with others who are concerned about climate change to embrace an energy policy that would move the country in that direction.

Turns out some are—in fact you’ll find a lot of them in the military and foreign policy establishments. But in ordinary political circles the debate is far too polarized to look for any such common ground. Which is one reason people on both sides of the Keystone and other big energy battles are resorting to weak arguments to push their cases.