Back when the idea for the Keystone XL pipeline first came out, I wrote numerous pieces suggesting that while I worried about the environmental impact of extracting and refining oil from tar sands–a particularly dirtier process–I figured that it was likely coming out of the ground, regardless of whether it ultimately went south through the US or west through Canada.
Now I’m not so sure. The sharp decline in oil prices changes the calculus, as noted in this Marketwatch analysis:
…the Canadian Energy Research Institute estimates that oil-sands projects need a price of $85 a barrel to be profitable in the current cheapest…method and new standalone mines will require $105 a barrel to make a reasonable return.
Crude is trading at $75/barrel as we speak, and the EIA just cut its year-ahead forecast by $18 to $85/barrel.
Of course, they could be wrong and oil could climb to a high-enough perch to make tar sand extraction profitable. Meanwhile, the timing of the politics could easily push Congress to offer bipartisan support for Keystone this week, as Louisiana Sen. Mary Landrieu wants this behind her in her upcoming runoff election.
But for now, the economics may be doing the environment a favor by pricing oil at a level that could keep the tar sands underground.
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Low prices might keep the goop in the ground for a while but long-term? I’m skeptical. It would be best for 1) the pipeline not to be built and 2) for us to reduce our usage of hydrocarbon-based fuels. Absent #2 though, I’m not sure how much #1 matters – http://www.realclimate.org/index.php/archives/2011/11/keystone-xl-game-over/
Fracking is contributing significantly to the price decline, no? To put it mildly, there are some significant environmental concerns with fracking. Fracking goes away and the conditions which made XL desirable return. Maintain the market pressure which keeps oil prices down and XL from being built and you end up with potentially bigger environmental problems then if XL got built. Choose your poison. (At least that’s how I’m seeing things at the moment. I’ve anyone has a more upbeat reality-based analysis I’m open to hearing it.)
I think somebody needs to make the case that that oil should be left in the ground for now because we’ll need it later for purposes other than burning it. I really don’t care if we run out of oil for burning purposes because alternative technologies will certainly be able to provide all the power we need. But manufacturing synthetic polymers for industrial and health purposes is going to be very expensive in the future if we have wasted it all by burning it.
I also see fossil fuels going to specialty plastics only which means we have enough for centuries. This makes more sense than rampant burning to live big now only to suffer (or go extinct) later.
Is there a good reason that America should be subject to the environmental risk of transporting Canadian tar sand oil as well as suffer the deleterious effects of the consequent climate change inherent in the product? Seems like a double loser, to me (but maybe not to the Koch brothers).
If you really don’t think that there is a business case for building the pipeline, then issue the permit and make it a moot point.
On the other hand, when ISIL takes over Saudi Arabia and oil goes over $300/barrel, people will take their revenge on the politician who opposed the pipeline.
Oil is a cyclical business. Sometimes oil drives the cycle and sometimes the cycle drives oil.