Comments on: Keystone XL’s organizing principle Thu, 21 Jul 2016 07:57:19 +0000 hourly 1 By: CornDogMan Fri, 20 Jan 2012 22:34:04 +0000 CapitalismSays,

Your textbook Economics get punted when OPEC decides to cut supply (i.e. artificially restrict) in the face of an increase in the supply of oil from Canada to keep prices high (as they have demonstrated numerous times in the past).

Like Mike said, oil companies have no interest in reducing the price of oil – whether it be Canadian oil firms, ExxonMobil in the U.S., or an OPEC oil sovereignty.

By: glotd Fri, 20 Jan 2012 21:39:56 +0000 @CapitalismSays: Your analysis is astute, but it misses the point because you’re not fully taking into consideration the existing situation.

The reason the price of fuel would go up for Americans if the pipeline was completed is because an already existing pipeline carrying that oil has a terminus in Cushing, OK–a location from which export is difficult. This currently causes a regional reduction in oil prices according to the same effects of price and demand that you’re suggesting should cause the price of oil to go down if Keystone XL was completed.

If a pipeline all the way to the coast were completed, that situation would change. It would be more profitable for the parties selling the oil to ship the oil outside the US than to sell it at Cushing, which would reduce or eliminate the regional surplus and similarly affect the price benefit consumers within the region currently enjoy. Thus some Americans would pay more for fuel. In the absence of a reason to believe there would be an offsetting effect somewhere else in the country, it’s fair to say that (in the aggregate) Americans would pay more.

It’s probably also worth mentioning since you bring up the price of corn that many of the farmers who produce that corn (wheat and rice, too) are within the region that benefits from the existing reduced fuel cost. The price impact that has on the food you eat and the ethanol component of the fuel you buy is probably small, but unlikely to be zero.

By: CapitalismSays Fri, 20 Jan 2012 17:27:04 +0000 Interesting article. The Republicans botched this bad. Job creation was the wrong way to go about arguing it. Buying oil from a friendly nation and cheaper gas are the key selling points. Sad to see that a vocal minority was able to postpone the pipeline, unless you prefer your oil to be of the Arabic or Venezuelan variety. Besides, it will just go to China anyways where emissions standards are less stringent and will create even more pollution.

As for the statement above suggesting that supply has little impact on the price of a fungible commodity…I don’t know what to say. But let me give you a prime example of why that is utter nonsense and several reasons why your evidence leading to that conclusion is wrong.

Natural gas is currently cheaper than it was 10 years ago despite the fact that demand has steadily increased (aside from 2008). This is due to increased production, lack of means to export it and storage being nearly at capacity before winter. AKA a huge over supply. Not a lack of bidders. In fact bidders have increased as it is now cheaper than coal.

Electricity is, in fact, not rising. Most of our incremental power supply is generated by natural gas (it’s hard to turn down a coal boiler and impossible to turn down a nuclear reactor)and price has therefore followed it lower. It declined about 25% in Q4 of 2011 and even before that it was well below 2009 levels.

Corn is not selling at record prices. It’s down to 6.00/bu from 8.00/bu earlier in the year. The recent decrease was due to evidence that South America will not experience adverse weather as previously suspected (increased supply). The US also announced ethanol subsidies would end which has hurt small ethanol producers ( slightly decreased demand). The larger ones are still producing as much as they can.

These facts would suggest that increased supply would in fact lower price…so would any econ 101 textbook. If you’re going to dispute the fundamental effects of supply and demand, please use accurate information.

By: Mike_s1 Fri, 20 Jan 2012 16:06:27 +0000 Hard to believe that the simple economic fact that adding the pipeline will raise the price of gasoline. Right now the value of the tar sands products is low, because it is difficult to access and only has one potential consumer (Asia, via the Canadian Pacific coast, the same as Alaskan crude). While the pipeline will reduce transportation costs and bring more oil online (not enough to drop wholesale oil prices…not that the pipeline operators are interested in lowering wholesale oil prices. They can always reduce pipeline use if it is ‘uneconomical’), the refined products are now available at the Gulf Coast ports, with a wide number of users. These consumers will bid against themselves for the refined products, bidding up prices.

Oil companies do not exist to save us money or have interest in low oil prices, but somehow the ‘drill baby drill’ faction thinks that higher production results in lower prices. We currently generate more electricity than at any point in our history, but the price per KwH continues to rise. As with any commodity, the number of bidders controls the price, not the production of the commodity. Bumper crops of corn are now selling for record prices, because there are more consumers (Asia, biofuels, etc) to make up for the increase in supply. But potential damage to the Ogallala aquifer from a pipeline ‘mishap’ would quickly make the BP Gulf spill the 2nd worst oil disaster.

By: A_Siegel Fri, 20 Jan 2012 12:17:33 +0000 Very thoughtful piece.

Hard to believe, isn’t it, that an independent analysis would suggest that the Corporation’s jobs claims were exaggerated. And, well, since Representative Boehner is using jobs claims multiples higher than the Corporations …

The Keystone XL opponents weren’t constrained to public demonstrations. After all, Freedom of Information Act requests ended up bringing sunshine to information that suggests illegal lobbying activity, questionable involvement in the pipeline company in overseeing “Government” public hearings, that the State Department had put little resources into its oversight & review, etc …