The Shrinking Economic Payoff Of Keystone

Michael Levi considers how pummeling oil prices might affect the pipeline:

Lower oil prices reduce both the costs and the benefits of approving the Keystone XL pipeline by reducing the odds that it will ever be fully used. There’s an outside chance that, if prices are sustained at an extremely low level, the Keystone XL pipeline won’t get built. That scenario isn’t likely – among other things, if Canadian production doesn’t grow, the odds of sustained low prices decline substantially – but it’s not zero. Lower prices also raise the odds that the pipeline will be built but not fully utilized. In that case, you still get the up-front construction stimulus, but you get less benefit from greater oil production, and less climate damage from the same. You also have a waste of economic resources.

The more likely scenario, though, is that the Keystone XL pipeline gets built and used. In that case, lower oil prices reduce its economic benefits without any clear impact on its climate costs.

Jordan Weissmann contends that “Keystone is neither irrelevant, nor especially critical to the future of Canadian oil”:

Keystone would probably be a small boon to the American fossil-fuel industry, even at this late date. Remember, the pipeline would send crude to refiners on the Gulf Coast. And what do refiners do? They buy oil, then transform it into gasoline, diesel, and other products to sell. The less expensive the oil, the easier it is for them to turn a profit, and the heavy crude found in the tar sands—which gulf refiners are specially equipped to process—is especially cheap, even compared to similar low grades from Mexico and Venezuela. This week, for instance, Western Canadian Select has traded at around just $33 a barrel. The refinery owners of Houston would surely love to get their hands on more it, but in a world of generally low oil prices, doing so isn’t exactly a matter of life and death for them.

Rebecca Leber wishes the Dems’ amendments to the Keystone bill didn’t focus on jobs:

Keystone emerged as a national issue when it became a symbol of climate change. Democrats ought to be marshalling their resources to remind people that Keystone is more about polution than it is about jobs. The pro-environment amendments have a slim chance at passing anyway. If Democratic amendments are hopeless from the start, they might as well go for bolder proposals, like a carbon tax, that will help at least to remind us of bigger things at stake than a few dozen jobs.

But Morrissey imagines that those amendments might get Obama to sign the bill:

If Democrats offer amendments that Republicans can support, the White House can claim that the bill has changed enough to their satisfaction — in essence, declare victory and depart the field before anyone asks too many questions.