TransCanada’s proposed $7.6 billion Keystone XL pipeline, a massive project that would transport Canadian oil to Texas refineries on the Gulf Coast, has been pitched as a way to lower domestic gas prices. But a coalition of environmental groups on Tuesday produced a new study claiming the pipeline would have the opposite effect.
“Our study has found that Keystone XL is both likely to decrease the amount of gas produced … and increase the cost of producing it, leading to even higher prices at the pump,” said Anthony Swift, co-author of the report and an attorney with the Natural Resources Defense Council, a Washington-based environmental group. Two other environmental groups, Oil Change International and Forest Ethics Advocacy, were also partners in the survey.
According to the study, the Keystone pipeline, which has been put on hold by the Obama administration, would deplete the Midwest of much of its crude oil by redirecting fuel to Gulf Coast facilities where the tar sands oil could be refined into diesel and shipped to more lucrative international markets.
That disruption of the current crude oil market, the study argues, would cut the supply of gasoline significantly and, subsequently, jack-up pump prices in the United States.
Mr. Swift and his co-authors, Lorne Stockman, director of research at Oil Change International and economist Ian Goodman, predict that, if the pipeline is built, the oil-and-gas industry’s priority will be maximizing profits — not addressing disruptions in gas supplies for American drivers.
But oil industry leaders were quick to push back, arguing that the pipeline would loosen a bottleneck of crude oil now sitting in Cushing, Okla.
Pipeline supporters want to get rid of the bottleneck and increase the supply of oil in the market that’s ready to be sold. The basic concept of supply and demand, they say, will naturally lower gasoline prices.
“Supply matters,” Marty Durbin, executive vice president at American Petroleum Institute, said in a statement. “More supply could help put downward pressure on prices.”
“Approving the full Keystone XL pipeline would send a strong signal to the markets that more supply is on the way from domestic and friendly sources,” he added.
But opponents are skeptical.
“We have known the pipeline will raise gas prices for over two years,” said Jane Kleeb, director of Bold Nebraska. “It all makes sense once we get beyond the fancy ads from TransCanada. If oil is diverted from Cushing down to the Gulf Coast, then we have less oil to draw from in the heart of America.”
The study also argues that the pipeline, if built, would increase the cost of a barrel of Canadian oil by $20 to $40. Right now, Canadian oil sells below the industry average. In March, it sold for $70 a barrel to the Midwest, compared with similar international products that sold for $110 to $115 during the same period.
Giving Canada access to international markets through the Keystone pipeline would allow it to even out the price, project opponents argue. This could cost U.S. drivers an additional $27 billion a year at the pump, according to the study.
TransCanada recently reapplied for all necessary permits to begin construction of the Keystone XL, but the White House isn’t expected take up the issue again until after the November election.
The project has become a key issue in the 2012 presidential election — Republican presidential hopeful Mitt Romney has vowed he would approve Keystone on his first day in office.