The endless waxing about Keystone XL continues with the latest delay having come and gone. I believe the pipeline will be approved in the not too distant future, and no one should be surprised by when.
The President began his first term in office by emphasizing green energy projects as a way of developing energy independence. On his watch emission standards have been increased and an image of being against carbon based energy production has been fostered at every opportunity in favor of alternatives. These actions are substantiated utilizing the cloak of climate change.
When I spoke to some well-connected Calgarians, the belief is that pipelines will get done eventually. I was told by one recruiter that many companies are holding back their hiring plans until they get more visibility on Keystone; and I suspect there are a number of businesses across North America in a similar position.
The President has no incentive at this juncture to approve the pipeline. Indeed by keeping this matter in his back pocket, he has something to draw on later in his administration where he, and he alone will enjoy maximum credit.
The reasons for this are many.
Seldom does any president complete his second term without some type of scandal blowing up in his face. This has been an ongoing rite of passage for the highest office in the country. What, if any scandal the President will face is yet to be known. With Keystone, he has an ace to draw on if and when this time comes.
The President has presided over the largest increase in domestic oil production in more than 30 years.
The President ran a campaign and a first term on climate change, green energy and seemingly anti carbon rhetoric. Democrats in general are often accused of being anti-energy; and yet this administration has benefitted from an incredible increase in production due to technological breakthroughs developed over a number of years in the patch.
While imports continue, the dynamic domestic oil environment that has been evolving via extensive infrastructure build out and new technology, has made imported crudes less competitive vs domestic options in many cases. More importantly, the choice between domestic vs imported crude is more of an option than ever before for many refineries who were subject to pricing of one specific type or another due to its location and infrastructure limitations.
The by-product of the seemingly endless Keystone delays has been the massive increase in rail born crude. As a result there have been significant build outs of facilities, track and storage as well as trucking to accommodate this mode of transportation. This is great for all parties because it increases flexibility of delivery for producers. It also increases supply options for refiners buying product, and consumers are less likely to experience price shocks due to downed pipelines.
This enormous benefit, in part a by-product of the delay for Keystone, will no doubt be credited to the President.
The President has Keystone in his pocket for a rainy day. He won’t be letting his successor enjoy this credit. Nor will he have to assuage any supporter late in his administration. No midterm electioneers will be allowed to enjoy the benefit for this decision either.
He alone will go out of office with the largest increase in domestic energy production in several decades. This in spite of appearing and stating at every opportunity that he his pro alternative and effectively anti carbon.
He will complete his presidency as a Democrat with these “pro energy” achievements on his record and by adding Keystone’s approval late in the game, he will cement his energy record as the ultimate paradox.
If I was a betting man, I would be looking at those companies that are likely to benefit from this project in the last 6-8 months of his Presidency.
I'm not a political analyst by any means, but this doesn't sound overly far-fetched.
I agree that the Keystone will get done, but I'm not sure I follow you argument as it pertains to President Obama. Given that he has, as you've said, built campaigns on "climate change, green energy and seemingly anti carbon rhetoric," why would he turn his energy legacy into what you call the "ultimate paradox?"
Even if we assume you are correct that the benefits would outweigh the costs of changing direction, I don't think the timing makes sense. His approval rating has been in the low 40s for over a year, but you think he would want to keep waiting? Why would he wait until the very end of his term, so that many of the benefits don't occur until the next president is in office and able to claim some credit for record oil production and lower costs at the pump? Why wouldn't President Obama go ahead and pull the trigger so that he can get the momentum to accomplish all of the other higher priorities on his list (immigration reform, etc.)?
Again, I agree that it will get built and be a great political windfall for many people, but I don't think this is what the President wants and if it is, I don't see the motivation to wait. The idea that he's just waiting for some major scandal just doesn't seem to cut it, unless he and you know something the rest of us don't.
The President will not have to worry about any numbers late in his term (and I don't think he cares now). The benefits in terms of economic activity may go to the next President, but he will be the one signing it and getting full credit for it. The credit is all that matters in politics.
His successor will be seen as completing his work; but will be his name in the history books, not the other guy.
Plus, he signs it late in his term he gets to steal some of the thunder of the new President in waiting.
The paradox is the pursuit of one angle, while benefiting from the other. He will lose nothing on his green initiatives at that point and get to claim a significant energy "breakthrough" at the same time.
Yes Democrats may benefit from the signing, but again, he will have signed it. They will owe him.
...and remember, the oil production benefits already "accrue" to him while the increases in Canada won't be of interest, he will get a diplomatic benefit instead.
The interesting thing here is that the need for heavy crude from the Gulf refinery could certainly be met in the short-term by Mexico. Even though production has been declining in the country, the recent energy reform opens the door in the next five years for higher heavy crude production. Not to mention that they are really opening the doors for private investment and that the fiscal terms will need to be competitive in order for them to attract investment.
I'm all for the flow of goods and services, this should be done ASAP.
You may not be far off on the political aspect of this, but you seem to imply that the railcars do not have significant downsides relative to pipeline delivery. The issue here is twofold: Railcar delivery is significantly more expensive than pipeline delivery and railcar delivery is significantly more dangerous than pipeline delivery. We have a pretty old fleet of railcars in this country and, while the gov't is trying to force upgrades to them via regulation, incidents like the World Fuel railcar derailment are IMO much more dangerous than pipeline leaks. The environmentalists need to realize that this oil is getting moved either way. Railcars are both more dangerous and have higher emission rates.
http://en.wikipedia.org/wiki/Lac-M%C3%A9gantic_derailment
@ Dr. Shakalu - You should make sure to point out that the accident you are referencing happened because of criminal negligence by the rail employees, not necessarily because of the "aged rail fleet". Any transport of a flammable or hazardous material is dangerous, but more so when someone is negligent.
Good point, that was a poorly chosen example on my part.
Rail pricing may moderate as alternatives become available. It will likely still be more, but if differentials offset the additional cost, rail will be used. I think this is playing out in the Bakken now.
if you are going to post a thread about this topic at least call it what it is, bitumen. There is no such thing as tar sands in Alberta, just environmental woodplay.
I don't call you lone sheep just cause I'm hungry, don't call it Tar Sands just cause some hippy wants to feel better about his disgusting self.
I reread the article and......I don't see any use of the term tar sands. I usually call it heavy oil personally.
Due to at least a shower every day, shave and an aversion to patchouli oil , I am not welcome in the ranks of the great unwashed. So very much pro energy and pro Alberta.
"Due to at least a shower every day, shave and an aversion to patchouli oil , I am not welcome in the ranks of the great unwashed. So very much pro energy and pro Alberta." +1 for this!!!
I agree with a lot of what you have to say here, and find it very interesting you mentioned rail without mentioning who owns said rail. I think it's worth mentioning that if we take the oil off of rail, we are taking the money right out of Burlington Northern and Uncle Warren's pockets.
@"jp10" Warren only owns one slice of the railroad pie. You still have UNP, CSX, NSC, KSU, CP, CNI, GWR, and all of the tank car companies that have benefited from the demand for new tank cars to replace the old fleets. There are tons of jobs at stake and billions in mutual/pension funds that are invested in RR stocks that stand to lose. Buffett isn't the only player with $$$ riding on the rails.
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