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Pipeline or Pipe Dream? Keystone Could Have Unintended Consequences


The on again, off again saga that is the Keystone pipeline expansion plan has turned the logical into the divisive, and also made the project a lightening rod for critics and supporters alike. While the tide appears to be turning in favor of building it, with the President, the state of Nebraska and business leaders all easing their opposition, the long-fought deal might finally get done. Even the U.S. State Department has gotten in on the $7 billion project, by issuing a revised environmental impact statement that could provide cover should the White House choose to okay the plan later this year.

But even if it does get built and Canada's oil sands gain renewed access to the U.S., Patrick DeHaan, senior petroleum analyst at GasBuddy.com says there's no guarantee that it will ease recent pricing pressure.

"A lot of Americans, perhaps wrongly, believe that the addition of the (Keystone) pipeline will bring down gas prices," DeHaan says in the attached video. "The truth may run counter to that."

DeHaan explains that because of their ''land-locked" status, Canadian oil prices are not only lower than pretty much everywhere else, that supply is destined to end up in U.S. refineries "the moment it is pumped."

Clearly, Canada would like to see that price go up and will sell its oil to whomever offers the best price. The catch with Keystone, DeHaan says, is one of proximity. "The biggest concern being if the Keystone is approved, it could bring that Canadian oil closer to a port that could export it, thus driving up the price."

What's worse is if the pipeline expansion project doesn't happen, Canada would surely construct alternative routes to its own ports and export it from there. Another component that often gets overlooked and that is that Canada is already the largest source of U.S. oil imports - by some measures, supplying more than twice what we import from Saudi Arabia.

To say that the Keystone issue is complex is an understatement, and we haven't even begun to factor in environmental concerns and economic factors.