State Department Report Shows Steyer Gas Price Claims Are False

Billionaire Keystone XL opponent Tom Steyer, along with the group Consumer Watchdog, attempted a tough sell today, again rolling out the previously debunked claim that Keystone XL will raise the price of gas at the pump.

As their report puts it: “U.S. drivers would be forced to pay higher prices for tar sands oil, particularly in the Midwest. There, gasoline costs could rise by 20 cents to 40 cents per gallon or more, based on the $20 to $30 per barrel discount on Canadian crude oil that Keystone XL developers seek to erase.”

This is false. As page 65 of the ‘market analysis’ section of the draft State Department Environmental Impact Statement (SDEIS) clearly states:

“Midwest product prices are derived from Gulf Coast prices, both of which are in turn driven by international (rather than U.S. inland) crude oil prices. Enabling (additional volumes of) WCSB crudes to flow to the Gulf Coast would not change this dynamic.”

Opponents of Keystone XL have also repeatedly claimed that oil sands coming into Gulf Coast refineries would simply be exported. First of all, for the United States to export crude a license from the Department of Commerce is required.  Second, the State Department has found Steyer’s claim to be false.  From page 16 of the ‘market analysis’ of SDEIS:

“In addition to the concerns expressed about exports of refined products, there is a question of whether the oil sands/Western Canadian Select (WCS) crude oil transported into Gulf Coast markets via the proposed Project may be simply “passed through” the market and loaded onto vessels for ultimate sale in markets such as Asia or Europe. Under the current market outlooks, such an option is unlikely to be economically justified primarily due to transportation costs. Once the WCSB crude oil arrives at the Gulf Coast, the refiners there have a significant competitive advantage in processing it compared to foreign refiners because the foreign refiners would have to incur additional transportation charges to have the crude oil delivered from the Gulf Coast to their location.”

Therefore, the exact opposite point could be argued: Millions of Americans are feeling the pain of higher prices at the pump precisely because President Obama has not approved Keystone XL.  As the Boston Globe points out in an article today:

“US gasoline prices are still influenced by world events. Even though oil imports are approaching 20-year lows, and the United States is enjoying a boom in new fuel sources, gasoline prices are soaring again because of political troubles halfway around the world. The civil unrest and military coup in Egypt — a relatively small exporter of crude oil — and the ongoing in-fighting in Syria have energy markets worried that the unrest could spread to other oil-producing countries in the region, disrupting supplies. In just the last week, gas prices in Massachusetts jumped 14 cents, to $3.62 a gallon, according to AAA Southern New England. Crude oil prices are also rising quickly and now top $100 a barrel. Analysts believe gas prices are going to climb another 5 cents or more a gallon.”

While Egypt itself does not produce much oil, it sits astride the Suez Canal, through which about four million barrels of oil must pass each day.  It is well known that crude drives the price of gasoline and any disruption internationally in supply can affect prices – now there’s concern that events in Egypt could spark broader protests across the Middle East and North Africa, home to about a third of the world’s oil production.

The bottom line: it’s about supply and demand – and it’s clear that North America has the supply.  As the Paris-based International Energy Agency (IEA) recently found, North American oil production, and particularly oil sands, is sending “shock waves” through global markets slashing U.S. imports from OPECAs IEA executive director Maria van der Hoeven said, “North America has set off a supply shock that is sending ripples throughout the world…A real game changer in every way.” According to IEA North American oil sands supply will grow by 3.9 million barrels per day from 2012 to 2018. IEA also found that North America will provide 40 percent of new energy supplies by 2018 through the development of the oil sands, while contributions from OPEC will fall to 30 percent. Moreover, North America will be “all but self-sufficient” in its energy needs by about 2035.  That means we’d no longer be subjected to OPEC’s unpredictable price fluctuations. 

Yet, Keystone XL opponents like Steyer tell us we don’t need more North American oil – the very thing that could keep prices low. But this is not surprising since it’s pretty clear their motivation isn’t helping consumers get lower gas prices – it’s about one thing only: getting rid of oil altogether.

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