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Keystone XL Lowers Home Values, Raises Oil Prices

Why would South Dakotans want to let TransCanada run another tar sands pipeline through their backyard, when even a federal pipeline safety official says he wouldn't buy or build a house along the pipeline route?

The official, Bill Lowery, is responsible for community assistance and technical services for the southwest region of the Pipeline and Hazardous Materials Safety Administration (PHMSA).

At a Public Safety Trust conference on Nov. 21, Lowery was asked, "Knowing what you know about the problems in the Keystone XL's construction, what would you do if your house was in its path?"

His answer: "Here is what I did when I bought my house — I looked on all the maps, I looked for all the well holes. I found there is nothing around me but dry holes and no pipelines. And it's not because I'm afraid of pipelines, it's not because I think something will happen. It's because something could happen. ... You're always better off, if you have a choice...."

He trailed off before finishing his sentence, but added that, "If I was building a house, I wouldn't build it on a refinery, ... I wouldn't build it on a pipeline, because they're all industrial facilities. That's just the reality" [Julie Dermansky, "'Just the Reality:' Pipeline Safety Official Admits He’d Avoid Buying A Home Near Pipelines Like Keystone XL," DeSmog Blog, 2013.12.03].

Come on, Bill! Why worry? I'm sure all those dents and patches on the Keystone XL are just signs of TransCanada's master craftsmanship.

TransCanada plans to open the spigot on the southern leg of Keystone XL on January 3. No word on housing prices along that route in Oklahoma and Texas... but the mere announcement that Keystone XL South is ready to go is causing oil prices to rise:

“With the pipeline up and running, you are going to see drops in Cushing inventories,” saidMichael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “It drives up WTI prices far more than Brent. You are going to see a narrowing of the Brent-WTI differential” [Moming Zhou and Mark Shenk, "Oil Surges on Planned Start of Keystone Pipeline," Bloomberg via SFGate, 2013.12.03].

That oil price hike is a shocker if you've been trusting Rep. Kristi Noem and Sen. John Thune, but that's no surprise if you read the Madville Times.

19 Comments

  1. interested party 2013.12.04

    Typical Libertarian Kochtupus Christofascists: your checks are in the mail, John and Kristi.

  2. John Tsitrian 2013.12.04

    The price at an exchange-designated "delivery" point will affect prices of the futures contracts that are based on the cash price at Cushing. However, if overall supplies remain the same, the basis (spread between prices locally and prices at Cushing) between local markets and Cushing will widen because more supplies at these local markets will drive prices down locally. It's still a supply-demand market, and the fact that supplies at one spot are dwindling doesn't mean that supplies everywhere are dwindling. The overall oil market should be largely unaffected, given that overall supplies appear to be stable.

  3. interested party 2013.12.04

    Higher prices for fuel, extreme weather fluctuations and a corporate land grab: how conservative.

  4. Vincent Gormley 2013.12.04

    Supply and demand does not apply. Oil produced from tar sands will never power your vehicle. That is a fact. But don't let truth get in the way of your fiction based marketing points.

    How many marketing people are there in South Dakota and what exactly are they marketing that we obviously do not produce.

  5. Les 2013.12.04

    Tsitrian is wrong on pricing. Cushing oil flowed out of the Gulf to the north and is now bi directional. Oil will flow to the world markets from the oil locked production areas, more going south than refined coming back north. Now we compete with the 8 dollar fuel across the pond.

  6. Porter Lansing 2013.12.04

    Mr. John Tsitrian: Surely you are passionate in your attempt to promote the XL boondoggle but you're just making those points up. C'mon, man.

  7. John Tsitrian 2013.12.04

    Okay, guys, don't rely on me and my two decades of membership at the Chicago Board Options Excange, The Chicago Board of Trade and the Merc. We're all probably better off using the opinion of the U.S. Energy Information Administration and its forecast for the price of WTI going into 2014. This was their latest read, a couple of weeks ago. I'm done here for the day. http://www.eia.gov/forecasts/steo/report/prices.cfm

  8. interested party 2013.12.04

    Okay, John: don't rely on my five decades of having the GOP shoving eminent domain up my assets.

  9. Les 2013.12.04

    The problem with being right all the time, someone else is wrong all the time John. I will give you credit for your time on the board but I won't give you credit for referring to the purveyor of facts necessary in the good marriage of big oil and the US Gov.

  10. interested party 2013.12.04

    "In addition to the skewed sex ratio, 23 percent of Aamjiwnaang children have learning or behavioral difficulties – a rate about six times higher than children in a neighboring county. Canada-based Enbridge, an energy transport company, wants to boost and reverse the flow of a pipeline that currently runs from east to west across Canada, in part to send oil sands petroleum to refineries in Ontario and Quebec, according to a company press release."

    Read more at http://indiancountrytodaymedianetwork.com/2013/11/14/contaminated-tribe-hormone-blocking-chemicals-found-first-nation-families-152245

  11. Mike Verchio 2013.12.04

    It's amazing how many people feel free to believe what they want unencumbered by hard facts & then try to impose their ignorance on those with first hand knowledge . Paraphrased from somewhere .

  12. Les 2013.12.04

    It would be interesting to hear your collective reasoning on why the Cushing line was rebuilt to carry crude south and how that doesn't push our crude on to the world markets forcing us to compete with the higher prices of Europe, Mike? The similar relationship has a been evidenced by the offshoring of our industries forcing our labor markets to now meld with third world countries.
    .
    And Lar! stop all that junk about health, welfare and eminent domain, nobody gives a damn about that noise, unless you're the poor slob getting that eminent domain shoved up your assets.

  13. bret clanton 2013.12.04

    Mr. Tsitrian I have my own opinions about that big monopoly board you used to play on dealing with other peoples hard work and livelihoods. Did you never make a mistake in twenty plus years of trading? I have been in the cow business on the northern plains for over forty plus years and I make mistakes daily. But the biggest mistake I ever made was believing the South Dakota Republican Party plank 1.11.
    http://southdakotagop.com/about-the-party/our-platform/

  14. John Tsitrian 2013.12.05

    Ms. Geelsdottir, my first post in the thread explains the supply-demand fundamentals that will keep a lid on oil prices despite the "Cushing effect." As that was called into question, I posted my professional creds in the field and deferred to an analysis from the U.S. Energy Information Administration, where price forecasts for West Texas Intermediate crude oil through 2014 are consistent with mine.

  15. John Tsitrian 2013.12.05

    Mr. Clanton, I've successfully fed plenty of cattle in South Dakota myself and have always found those boards you demean to be an excellent venue for managing the risks inherent to livestock production. Contact the Chicago Mercantile Exchange at its website for information on how to incorporate futures and options into your operation. I can assure you of one thing--there are plenty of Democrats working there.

  16. caheidelberger Post author | 2013.12.05

    John's analysis isn't bad—increasing supply should decrease the global price, but Les makes the good point that we're on the wrong end of the local imbalance. We have cheap oil thanks to glut at Cushing. The world has more expensive oil (WTI vs. Brent crude). China wants the new oil. Keystone XL clears the glut and sends the new oil to China and elsewhere on the global market. We are seeing our prices rise (I'm not just speculating: the market response to the TransCanada's announcement is empirical fact). The balancing price drop will be spread out overseas.

    And possibly (this is speculation) it won't drop at all, because the tar sands require so much energy to tap that the oil they produce is inevitably more costly than the easy oil that fueled us for a century or so.

  17. interested party 2014.01.22

    Southern Dakota, your fuel prices are going up: think conservation and Canadians building another pipeline over the ground you stole from the Indians.

    You poor schmucks.

Comments are closed.