...and your gasoline prices will still go up.
A new study from researchers at the Stockholm Environment Institute (based in the U.S., not Sweden) says the U.S. State Department could be off by a factor of four in its estimate of greenhouse gas emissions that the Keystone XL pipeline would facilitate. The State Department says Keystone XL could lead to 1 to 27 million more tons of carbon dioxide belched into the atmosphere each year. Researchers Peter Erickson and Michael Lazarus say the additional carbon pollution could be almost nil, but they could also be as great as 110 million tons per year.
But check out the reason: Peterson and Lazarus say the State Department failed to include in its model the economic impact of Keystone XL, which will increase supply, lower global oil prices, and thus increase oil consumption. A working version of the Peterson-Lazarus paper from December 2013 suggests the new oil Keystone XL will bring to the market (510,000 barrels per day, 62% of the pipeline's capacity) would lower the global price of oil by $1.50 per barrel, from $101.10 to $98.60.
Attentive readers are saying to themselves, "Wait a minute! Heidelberger told us Keystone XL would raise our gasoline prices. These eggheads are saying Keystone XL will lower global oil prices. Heidelberger's an idiot! Build the pipeline!"
But here, you have to think locally, not globally. Not all segments of the market are created equally (as anyone traveling across the country last week and getting a motel room in Minnesota one night and the Black Hills the next can attest). As I've reported for years, the whole business case for Keystone XL hinges on clearing the relative glut of oil in middle America and connecting Canada's oil to the global export market. Keystone XL would erase the discount we Midwesterners get and divide it up among the Chinese and other global players.
Now if you want to give China your credit card reward points or the money you save on your capital gains tax rate, then hey, Keystone XL is for you. But if you're putting American interests first and/or if you would like to take one more action to mitigate carbon-induced climate change, you tell TransCanada to keep its pipeline out of South Dakota and leave more of that tar sands oil in the ground.