Keystone Pipeline Splits to Raise US Oil Prices

One of the less reported, but most important stories, of 2011-2012 is the fact that oil in the US has been 15-20 dollars cheaper than in the rest of the world. This disparity continues today with US oil costing $107 dollars per barrel and oil overseas costing $122 dollars per barrel, according to Bloomberg spot pricing.

This difference in price provides advantages to the US economy. It reduces the cost of transportation, jet flights and commerce in general. It reduces the price of raw materials produced here. And, overall, it reduces the cost of manufacturing in the United States, giving the US market a critical advantage for the first time in many years.

Yet despite these observations, Republicans are fighting tooth and nail to ship cheap U.S. oil overseas and thereby increase prices here. The main mechanism for this is the Keystone Pipeline. Keystone would ship oil shale and tar sands that have been building up at Cushing Oklahoma to the Gulf Coast where the oil could be sold for export on the world market. Prices at Cushing, because of the glut, are now $107 per barrel — more than $15 less than the cost of oil overseas (Bloomberg).

Now, in a bid to circumvent the delay, TransCanada, the company responsible for Keystone’s construction is splitting the Keystone Pipeline into two parts. This sleight of hand is intended to circumvent delays and proceed with construction. It is also likely to spur opposition from Americans who oppose the shipping of US and North American oil to overseas buyers and from those who are concerned about the environmental harm that is likely to come from pipeline construction and the over-rapid exploitation of tar sands and shale oil resources.

Once this oil reaches the international market, various international buyers could bid against American consumers, driving the price up and resulting in higher gas prices in the US. With US oil on the international market, gas prices are likely to surge by as much as an additional twenty percent.

Ironically, republicans have argued that Obama’s decision to suspend the pipeline has resulted in higher oil prices in the US when just the opposite has happened (The Nation). One wonders why republicans are fighting against American interests while spreading misinformation about the effect of pipelines on the price of oil for the US consumer? But these activities play well with other republican attacks on US energy independence including the US solar industry and electric vehicles produced by US companies like the Chevy Volt (The Guardian, Inside Climate, Energy Boom). These attacks harm the US economy and create an advantage for our overseas competitors, particularly, China (Salon).




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