NCPA - National Center for Policy Analysis

Keystone Can Help the Gulf

February 7, 2012

Opponents of the Keystone XL Oil Pipeline have taken a number of approaches to undercutting its usefulness as an energy investment.  Nancy Pelosi has recently joined this debate, asserting that there is little difference between Canada exporting the oil overseas or having it exported from the Gulf Coast.  However, this argument precludes the importance of the refining process and the enormous revenues that refiners could gain from the imported oil, says the Wall Street Journal.

  • According to the federal Energy Information Administration, the United States exported 3 million barrels per day of finished petroleum products in October 2011 -- a new high.
  • Meanwhile, domestic sales totaled 19 million barrels per day from all sources.
  • These sources included imports of 2 million barrels per day, due to transportation inefficiencies.

U.S. refiners could further capitalize on their new position as heavy net exporters were the pipeline to be approved.  Furthermore, the finished products of this production could be used not only to export to other countries but also to replace lost production throughout the United States and especially in the Northeast.

  • By summer 2012, ConocoPhillips and Sunoco will close plants in Pennsylvania.
  • This will result in the loss of over 700,000 barrels of production since 2008.
  • Additionally, the oil company Hess announced that it would close its refinery in the U.S. Virgin Islands, which provides large volumes of gasoline, heating oil and jet fuel in the Northeast.

Furthermore, fundamental indicators suggest that the near future is a time when refiners could prosper and thrive in the global economy.  Low costs for both oil and natural gas provide substantial opportunities for growth and expansion in a reliable sector.

However, the Obama administration has taken a stand against the pipeline and in so doing has undermined the prospects of American refiners.  In addition to having to overcome declining demand, new fuel standards, and augmented environmental regulations, refiners must now learn to compete in spite of an unsupportive administration.

Source: Lucian Pugliaresi, "Keystone Can Help the Gulf -- And the Northeast," Wall Street Journal, January 30, 2012.

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