Since Biden has announced his decision on the Keystone Pipeline, the right has been spreading their misleading fear campaign about extreme gas price increases. But the issue is far more nuanced than the headlines on Fox news, NewsMax and OAN. People need to develop a greater understanding of the oil business before blaming either side. In short, our gas prices and oil supply are determined by many forces outside of the control of the President.
Now in general I support pipelines for the transport of oil/natural gas products rather than using rail or truck transportation. Rail and truck transportation of oil is dangerous, costly and environmentally unsound but it does create far more long lasting jobs that are fairly distributed across America’s heartland than the short lived jobs needed to construct a pipeline. So if you really support long lasting jobs that are distributed over the heartland, you should really want to keep moving oil by rail and truck. And the radical left should prefer a pipeline over the more dangerous and polluting rail or truck transportation. Give this some thought before jumping on the talking points of the politicians and industry lobbyists on both sides. But the constant talk about loss of oil jobs is an intentional distraction because there is a much better way to increase jobs while securing widely available, well paying jobs fairly distributed across our nation.
Now specifically regarding the Keystone Pipeline, it is important to realize that the underlying goal is to provide a way for Canada to move its tar sand oil to the world markets. This specifically includes China who has been a supporter and investor in Canadian oil companies. Once the Canadian oil gets to our gulf, it will be sold to the highest bidder. This will not be America.
We are just being used as cheap transport provider for Canada. If Canada wants to sell their oil to China tell them to build a pipeline over the Rockies and ship it off of their Pacific coast. Or they could also go to the Atlantic coast. But they don’t want to do that as it is cheaper to get the US to allow their front company TC Energy, the right to take the land of American citizens through eminent domain. How can any true conservative support the taking of a person’s land?
So if we are going to build a pipeline, let’s stop it in the heartland, build some refineries and keep that oil in America. Don’t be taken in by the industry lobbyists.
Further, if we are going to build any pipelines, they must be built with US steel and legal US workers. No cutting corners. If any of the sub-contractors are caught hiring illegal immigrants to do the hard labor, their CEO should go to jail. No fines, no excuses; just jail bedding with Bubba as their cell mate.
But there are even more economic problems with this particular pipeline. From my research, Canadian tar sand oil is one of the most expensive forms of crude oil to mine and transport. Estimates put its production cost at $85 per barrel.
Now if you know anything about the oil market, you will know that our so called buddies (in reality terroists and traitors) in Saudi Arabia have a history of manipulating the price of crude oil. Why? Because they have the lowest cost of production in the world at as low as $5 a barrel. In addition, they also have a type of crude that allows easy manipulation of the supply. The Saudis and many of the Middle Eastern oil producers have the most desirable light sweet crude. This type of oil is easily pumped, transported and refined. Further, because this is a very light, liquid form of crude, they can rapidly and cost effectively stop or ramp up production.
This is not so with the heavier forms of crude. Starting and stopping production, transport and refining of the heavier crudes is not as easy and makes the production even more costly. Some crudes must be continuously pumped or the crude stops moving, permanently. American fracking operations are also difficult to stop and start on demand.
Here is a somewhat dated chart of the cost of crude production. Costs may have changed somewhat but the differentials between the producers remain.
Marginal Production Cost, 2014
Cost of producing an additional barrel of oil (USD/bbl)
| Country | Exploration Type | Marginal Production Cost | Transportation Cost |
| Russia | Arctic | 120 | |
| Onshore | 18 | ||
| Europe | Biodiesel | 110 | 2 |
| Ethanol | 103 | ||
| Canada | Sand | 90 | 15 |
| Brazil | Ethanol | 66 | 5 |
| Offshore | 80 | ||
| United States | Deep-water | 57 | |
| Shale | 73 | ||
| Angola | Offshore | 40 | |
| Ecuador | Total | 20 | |
| Venezuela | Total | 20 | |
| Kazakhstan | Total | 16 | |
| Nigeria | Deep-water | 30 | |
| Onshore | 15 | ||
| Oman | Total | 15 | |
| Qatar | Total | 15 | |
| Iran | Total | 15 | |
| Algeria | Total | 15 | |
| Iraq | Total | 6 | |
| Saudi Arabia | Onshore | 3 | 2 |
| United Arab Emirates | Total | 7 |
Source: https://knoema.com/infographics/vyronoe/cost-of-oil-production-by-country
The Saudis know this and take advantage of this. They have used their flexibility and very low production costs to selectively drive down the price of oil to challenge other oil producing countries activities. Most recently, they directed their manipulation at Russia which is why gas prices in the US dropped. They have since reached a deal with Russia which has caused the price of oil to increase. This deal coupled with the recent uptick in the US economy and demand of gasoline is the reason gas prices have increased.
In a few years ago, the Saudi’s also went after the US fracking expansion to make it less attractive to oil producers. US shale oil obtained by fracking costs around $70 a barrel to produce. It is an easy target for manipulation by OPEC.
So all this recent talk of Biden causing the price of gasoline to increase is a bunch of BS. It is just another Republican and oil industry talking point and is a distraction to drive fear and division in our country.
Here is another thing to think about. The major oil companies are rapidly divesting of their oil assets. For example, BP and Shell are divesting many of their oil and gas assets as they recognize the move to renewable energy is the future. They recognize that oil is a bad bet in the long term. Sort of sounds like Trump’s failure to understand that coal is a dying industry no matter how much he tried to pump it up. You have not heard him talk about coal for the past few years. Automated mining drove the loss of coal jobs not Obama. While simple economics coupled with cheap, easy to transport natural gas drove the demise of the coal industry.
Now don’t get me wrong, the world will run on oil for a while and the US must protect our national security by making sure we are oil independent. But this independence will come at a cost. Security is never free. If you look at the cost of production, using only US produced oil will increase the price of gasoline no matter which party is in charge. It is simple economics. And worse, if we choose to go it alone, other countries will enjoy the resulting lower world price that Saudi Arabia will likely set just to make our lives more difficult. This means that China will likely enjoy even cheaper energy costs further strengthening their world economic power.
But we also must recognize that the faster and more efficiently we make the transition to other sources of energy, particularly those that offer greater opportunity for decentralization and less dependence on major multinational corporations, the more secure and and productive our nation will become. And who would rather work on an oil rig when they could work in a job rebuilding our electric grid, installing solar panels all across America, installing and maintaining wind turbines across the heartland, placing charging stations across America, and all the other well paying, clean jobs this inevitable transition will create.
Viewing oil as our future is looking backwards and not ahead.
Roger That! 