Tim Worstal on Keystone XL: These people really are getting desperate!

I really do understand that there are people out there who don’t want the Keystone XL pipeline to be built. For a number of different reasons, some of them even possibly sensible reasons. But there are at least some of the people opposing that pipeline who seem to be becoming desperate, even to the point of advancing self-contradictory arguments to oppose the pipeline. One such is here, from Consumer Watchdog.

U.S. gasoline prices will rise, with the greatest effect on the
Midwest. The chief purpose of the pipeline is to raise the price
of Canadian tar sands by creating new export markets outside
the Midwest. Statements by Alberta, Canada officials and the
pipeline developers reflect this aim. Their explicit intention is
to export to the Gulf and abroad, which would increase the
price of crude oil and gasoline in the United States and, in
particular, the Midwest.
• Midwest drivers would be hardest hit because the region
currently imports more than half of its oil for refining from
Canada. Increases at the pump could range from 25 cents to
40 cents a gallon, depending on how regional refineries re
spond to paying $20 to $30 more per 42-gallon barrel for
Canadian crude oil.
• Canadian oil currently sent to the Midwest from Canada
would likely be diverted to Keystone XL to reduce Midwest
supply, which would put additional pressure on gasoline prices.
• Midwest refiners have been reaping exceptional profit on
cheaper Canadian oil and will resist giving up that profit to off
-set the large increase in the price of their Canadian crude oil.

That last point doesn’t accord with the first point being made. In fact, that last point makes the first point being made wrong. It’s not possible for both to be true.

Think it through for a moment. Yes, Keystone will mean that more of the Canadian tar stuff reaches the Gulf refineries. This means that less of it will get stranded at Cushing OK. So, yes, the price of crude at Cushing will rise.

This could mean that gasoline prices will rise in the Mid West. But it can’t mean both that gas prices will rise and that excessive refining margins will fall. If excessive refining margins are being made then people in the Mid West aren’t getting cheap gas to reflect the low crude price. That’s where the excessive margins are coming from, from the fact that the gas price is disconnected from the crude price. So, we might either see a fall in those refining margins or a rise in gas prices. But both won’t be happening at the same time. If Keystone removes the oversupply of crude at Cushing then refining margins will fall and there’s unlikely to be much effect on gas prices.

The aim of tar sands producers with refining interests on
the Gulf Coast–primarily multinational oil companies–is to
get the oil to their Gulf refineries, which would process addi
tional oil largely for fuel exports to hungry foreign markets.
Other oil sands investors, including two major Chinese petro
chemical companies and major European oil companies, have
an interest in exporting crude oil and/or refined products
to their markets. Such exports would drain off what the tar
sands producers consider a current oversupply, and help push
global oil prices higher.

And that’s just ludicrous. How is an increase of supply of crude to the international markets going to increase the international price of crude? Have we entered some mirror universe of entirely alternative economics or something? An increase in supply leads to a fall in price, not an increase.

If you’d like a more detailed look at the arguments being made I recommend this from Craig Pirrong, aka The Streetwise Professor.

But my basic diagnosis is that some opponents of Keystone XL are becoming so hysterical in that opposition than they’re becoming incoherent in their arguments.