It\’s worth reading this just to see quite how insane the Koch Brothers drive parts of the US left.
An oil pipeline from the Canadian tar sands to the Gulf Coast may or may not be a good idea. But the argument has become that the Koch Brothers will benefit, profit, from it therefore it must be a bad one.
One little detail that amuses:
As if all of that wasn\’t reason enough to call this a bad idea, Keystone XL is actually expected – by its operating company\’s own admission – to raise the prices of oil in the Midwest, and not bring it down in the rest of the country.
This is actually true, weird though it seems. More oil coming through will increase the price of oil?
Well, yes. For it\’s all about the pipelines.
The price difference between the world’s top oil benchmarks reached an intraday record of more than $16 a barrel, doubling in three weeks, as West Texas Intermediate oil disconnects from top global oil references Brent and Dubai. The spread fell back to just above $14.
The divergence, which is wreaking havoc among energy investors and traders, prompted Saudi Arabia two years ago to drop WTI as its benchmark for pricing oil to US customers.
West Texas Intermediate (WTI) has as its pricing reference point Cushing, Oklahoma. And there are more pipelines carrying oil into there than there is refining capacity to make use of it. Thus local prices for crude are lower than global prices as we can see there.
The new pipeline, Keystone XL, will replace (erm, perhaps extend) the one that terminates at Chushing with one that goes all the way to the refineries on the Gulf Coast.
This would eliminate the over supply to Cushing and increase supply to those Gulf Coast refineries (some of which currently operate off sea imported crude).
What we\’re actually seeing is a nice little piece of physical arbitrage. Oil at Cushing is worth x. Oil at Port Arthur is worth x plus. Build a pipeline that gets oil from Cushing to Port Arthur and we\’ve increased the value of that oil by \”plus\”. As long as plus is greater than the cost of building and operating the pipeline then we\’ve increased wealth: we\’ve moved resources from a lower to a higher value use.
Quite why this is a bad idea escapes me, even if part of the end result is that the Koch Brothers make more money.