The Key to Keystone

While we’re talking about Keystone, there’s an interesting little detail in the State Department environmental impact report–the one that said the pipeline would have no impact on greenhouse gas emissions–that I haven’t seen anyone notice.  Now, perhaps this is because no one, certainly no reporter, has bothered to read the document.  And to be sure, no sensible human being ever reads these interminably long EIRs.  But I am not a sensible human being, and although I didn’t read the whole thing, I looked carefully through a few key parts.

The premise of the negative impact finding of the State Department report is that Canadian oil is going to come out of the ground and go somewhere, pipeline or no pipeline, and it is going to get used.  It will either go by rail here to the U.S. (see the previous post on this), or it will go by rail, pipeline, and tanker from Canada to China.

But the State Department did allow there was one condition that would change this: if the price of oil dipped back down below $65 a barrel.  (It’s been around $100 a barrel for quite some time now.)  At that price, Canada would be less likely to produce as much of this high cost oil, and indeed the transportation costs to ship it to China are higher than through the Keystone pipeline.

But understand what a world of $65 oil would mean: it would mean we had re-entered a world of abundant and cheap oil.  (Adjusted for inflation, this price would be less that the cost of oil in the glut days of the 1980s.)  It would mean the world would be using a lot more of it.  It would mean higher greenhouse gas emissions.  It would mean we wouldn’t care any more about whether the Keystone pipeline is built.  So environmentalists lose big time either way here.  That’s what I love about environmentalists today: they have no idea what huge chumps they’ve become.

Some petro-optimists think we’re heading for cheap oil again.  I doubt it, but predicting oil prices has made fools of a lot of people, so I stand by my expectation here very weakly.  Sit back and enjoy this slow-motion environmentalist face-plant.