Congress has just over a month to pass a $106 billion transportation bill that would pave the way for new highways, railways and bridges in this country. Lawmakers are making progress on the legislation; however, there is one major hold up: the Keystone Pipeline. If Congress cannot agree to a deal by June 30, its authority to spend that money will run out.
President Barack Obama rejected the controversial pipeline in January. He said he'd veto any legislation containing authorization to expedite the Keystone Pipeline until more research was done to fully assess the environmental consequences of the project, which would stretch 1,661-miles from Canada's oil tar sands through North Dakota to refineries located on the U.S. Gulf Coast.
Republicans, on the other hand, are pushing to get the $7.8 billion TransCanada (TRP) project underway as soon as possible. They say the pipeline will have a positive impact on U.S. jobs and gasoline prices.
TransCanada estimates the construction of the Keystone Pipeline would generate at least 20,000 direct jobs. The company forecasts that another 120,000 peripheral jobs in the restaurant, hotel and service industry would be needed to help support the construction of the pipeline. The State Department, which must approve the project, puts the number of direct jobs at roughly 5,000.
U.S. gasoline and oil prices have fallen dramatically in recent weeks because of weaker demand, continued concern in Europe and hopes that Iran's nuclear ambitions have been tamed.
WTI crude hit $90 a barrel on Wednesday, a seven month low, before jumping back up to $92 Thursday on news that talks between Iran and six global powers came to an impasse. All parties have agreed to reconvene in June. The average price of regular gasoline is $3.67, according to AAA.com, down $0.17 cents from a month ago.
TransCanada expects the Keystone Pipeline to push an additional 830,000 barrels of oil a day into the country for U.S. consumption. Intuitively, when considering the laws of supply and demand, one would think the pipeline would help bring down the price of U.S. gasoline even further. But according to a new report by the Natural Resource Defense Council (NRDC), the Keystone Pipeline could actually lead to an increase in prices at the gas pump.
"Pipeline supporters cite high gasoline prices as a reason to build the project," according to the NRDC study. "The truth is that Keystone XL is likely to both decrease the amount of gasoline produced in U.S. refineries for U.S. markets and increase the cost of producing it, leading to even higher prices at the pump."
To discuss this highly polarizing issue, The Daily Ticker invited Anthony Swift, the author of the NRDC report and an attorney for the environmental advocacy group to debate the American Petroleum Institute's Executive Vice President Marty Durbin, who does not agree with the NRDC report and is pro-pipeline.
"The environmental impacts of Keystone XL are well known, but what hasn't been discussed are the consequences to the gasoline market in the U.S.," says Swift in the accompanying interview. "Rather than bringing additional oil into the U.S. in the short to medium term it's going to transfer oil from the Midwest, where refineries are focused on producing as much gasoline as possible to the Gulf Coast where refineries have now refocused to produce as much diesel as possible."
According to Swift, refineries on the Gulf Coast have reconfigured themselves to more efficiently produce diesel because that fuel is selling for a higher price on global markets. It is much easier for the Gulf Coast refineries to ship diesel across the globe than it is for land-locked refineries in the Midwest, which have instead chosen to focus on producing fuel for U.S. consumers.
Based on TransCanada's analysis, Swift believes the pipeline will lead to a $27 billion a year increase in crude costs for Americans as well as decrease the amount of gas produced in this country by 80,000 barrels a day.
Durbin does not agree with Swift. He believes the Gulf Coast refineries have been upgraded to produce gasoline just as easily as their Midwest counterparts.
Additionally, Durbin highlights the positive job impact of the project and the fact that this would help the U.S. wean itself from foreign oil.
"This crude oil is also going to be displacing crude that we are currently getting from Venezuela and Mexico," says Durbin. "So, the bottom line economics of this which has been laid out very clearly is that we are going to be able to add additional supply … into a global market that will end up depressing or putting downward pressure on prices."
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