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Keystone pipeline may add 40 cents to Midwest gas prices, report says

July 16, 2013|By Shan Li
  • Pipes for the Keystone XL project sit near Ripley, Okla.
Pipes for the Keystone XL project sit near Ripley, Okla. (Sue Ogrocki / Associated…)

The fiercely debated Keystone XL pipeline could raise gasoline prices in the Midwest by as much as 40 cents a gallon, according to a new report by Consumer Watchdog.

That’s because the pipeline would allow oil companies in Canada to export crude oil to a range of markets in the U.S. and abroad, leading to possible increases in the prices paid in areas that are already heavily dependent on that oil, according to the Santa Monica consumer group’s report released Tuesday.

If approved, the Keystone XL would carry crude oil along a 1,700-mile route from the massive tar sands of Alberta, Canada, to refineries along the Texas Gulf Coast. Oil can be extracted from the sands using modern technology. Alberta’s huge deposits rival the conventional crude reserves of oil-rich nations such as Saudi Arabia.

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The project has vocal supporters who say it would create thousands of jobs and bring in oil that would replace petroleum from hostile nations such as Venezuela. However, critics have said that the pipeline would create few long-lasting jobs, divert oil beyond North America to other consumers and pose great risks to the environment.

The Midwest, which currently obtains more than 50% of its oil for refining from Canada, would especially feel the pinch at the pump, the report said. Drivers could see gas prices go up by 25 cents to 40 cents a gallon, the report said, which collectively adds up to $3 billion to $4 billion a year in consumer income.

California and the rest of the West Coast import smaller amounts of Canadian oil, but a sharp rise in the price would still bump prices up by a few cents a gallon, the report said.

The consumer group argues that the pipeline would create another avenue for Canadian crude to travel outside of the Midwest and would reduce a surge in oil that has kept gas prices low in that region. Canadian regulators said in a 2010 report that the purpose of the Keystone project is to obtain new customers and higher prices for the country's oil.

“The true beneficiaries of the pipeline are the multinational oil companies investing in and producing tar sands petroleum in Alberta, Canada, many of which also operate refineries on the Gulf Coast,” the Consumer Watchdog report said.

The pipeline’s backers have made the opposite point, arguing that much of the 830,000 barrels of oil that could be moved through the pipeline daily would be consumed domestically, thereby reducing gas prices.

Last month, President Obama raised the bar for approving the remaining portion of the pipeline by announcing, during an address on his second-term environmental agenda, that its net effects on the climate would be “absolutely critical” to his decision. It was the first time he added such forthright environmental conditions to the Keystone XL approval process.


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