Keystone pipeline claims just don't add up
John W. Schoen - MSNBC
This excerpt is from MSNBC
ANALYSIS: Proponents of the Keystone oil pipeline argue the $7 billion project will create hundreds of thousands of jobs, give the economy a shot in the arm, lower gasoline prices and wean the U.S. from foreign imports.
Too bad the claims don’t hold up.
Oil price impact
Some of the biggest claims about the pipeline's economic benefits are based on the argument that it will lower oil prices by increasing supplies and reducing the risk of a cutoff of shipments from less-friendly foreign suppliers. That assumption generated some very large numbers in Perryman's analysis, some of which have become part of the political debate.
Perryman argues that removing even a small "risk premium" from reliance on foreign sources will have a huge impact on the U.S. economy.
"It's so much more than just gasoline," he said "When you work it through the entire economy and tilt down the cost structure over a $15 trillion economy, that generates some big numbers."
The number are indeed large. Based on the worst case -- the peak oil price of $147 a barrel reached in 2008 -- savings from more "stable" supplies would add an additional $221.3 billion in spending, $64.2 billion in output and 553,235 jobs to the U.S. economy. (Under more “normal” assumptions, based on the 2007 average price per barrel of $66.52, Perryman Group figured the benefit would amount to $100.1 billion in total spending, $29 billion in output and 250,348 permanent jobs.)
But critics argue that Keystone will raise the price of oil consumed in the U.S., not lower it. That's because the current glut of oil created by the bottleneck at the Cushing hub would allow Canadian producers to reprice their oil at the global benchmark, which is now about $15 a barrel higher. The total increase would amount to some $2 billion to $4 billion a year, according to the company's own estimates presented in its application to Canadian authorities.
"Oil companies don’t benefit by reducing the price that we pay at the pump," said Jeremy Symons, a spokesman for the National Wildlife Federation. "The reason they're willing to invest so much money to build in a pipeline all the way across America is to maximize their profit. And that means we're all going to pay more."
As a result of those higher prices, consumers in the Midwest could be paying 10 to 20 cents more per gallon for gasoline and diesel fuel, adding up to $5 billion to the annual U.S. fuel bill, according to the Cornell researchers. They figure that just one year of those higher fuel prices cancels out some or all of the jobs created by the project.