Keystone and the Decision to Depend On Mideast Oil

Though America has said it wants to rely less on imported oil from the troubled Middle East, it is a shame that America in the Keystone decision has elected not to buy oil from its economically and politically stable neighbor.

Nearly two weeks ago the Obama administration announced that it was delaying approval of the Keystone pipeline as yet another study needed to be conducted (reminds me of governments pushing a topic into an endless series Royal Commission as a means to delay something unduly or even kill it without saying so). The Obama administration has made a misstep on this matter. Studies have been done which have addressed various environmental concerns.

True no pipeline is risk free of spills occurring. No off-shore or even on-shore, oil rig is risk free of spills, nor are tankers that come along our shores and to our ports. The hundreds of thousands of gasoline trucks that travel contain higher risks of that a modern pipeline using the state of the art technologies. Do we stop trucks from traveling the road, tankers bringing crude to our shores, or do we stop drilling? No. Instead we manage risk in a thoughtful manner by learning from past miscalculations and utilize the best technology that is reasonable.

Will the Obama’s administration stall the development of the Alberta oil sands? Anyone who is an opponent of the Keystone is badly mistaken if they think it will end or even slow down the development of the oil sands project. Let’s make no mistake the oil in the tar sands will be coming out of the ground! It is a matter of to whom will the oil be sold, to the USA or to Pacific Rim countries which have robust economies that rely heavily upon imported oil such as Japan, China and Australia.

The question Canada should be asking of the American administration is simple, is the United States prepared to take delivery of the oil within five years? If the answer is not yes, but maybe eventually after we study the matter further for a few more years, then the Canadian response should be straight forward…announce that Canada will sell elsewhere and to that end will be adding to its pipeline infrastructure to the west coast as Canada has made a commitment to sell its oil to Japan, China and other Pacific Rim countries. Of course the American reaction to loosing such a quantity of oil so close at hand will be negative. The Canadians can readily reply that America was the preferred buyer but when America was not willing to commit, Canada elected to allow the free market determine that the oil would be going to other countries.

For Canada there are two economic advantages for selling tar sands oil to China and Japan. Both countries are willing to pay a significantly higher price than the Americans. Hence, Canada would have more net income, some of which could be used to decrease the crude it sells for internal consumption. Lower internal crude prices would enable Canada to have lower gas prices than the US and thereby giving Canadian firms another competitive advantage as a result of lower energy costs. Also, the pipeline would travel further across Canadian soil and the tanker port would be on Canadian shores all of which mean more jobs for Canadians than would be an pipeline running to the USA.