Your latest Keystone XL conspiracy theory, from…

posted at 6:30 pm on February 25, 2012 by Jazz Shaw

Everyone loves a good conspiracy theory from time to time. Lately I’ve really been enjoying Finding Bigfoot and Ancient Aliens. But such rumors and breathtaking legends aren’t restricted to the realm of mythical creatures or little green men. Still, I was taken aback recently when a Twitter follower unleashed a new one on me, involving my “wrong headed” support of the Keystone XL pipeline. There were the usual dire warnings about how it would kill off the white crested ground squirrel or something, combined with how it was the “dirtiest oil in the world.” (Hint: it’s all fairly dirty until you refine it.)

But the new twist was when I was informed in no uncertain terms that all of the “risk” associated with constructing the pipeline was for naught, because the sneaky Canadians weren’t going to let us have any of the oil once it arrived at the Gulf of Mexico refineries. They were simply going to export it all and leave us holding the bag. (This “theory” is spreading. You can read one example here.)

That was simply too tempting to ignore and I just had to dig into it. Where could such an outlandish idea come from? PETA? ELF? Daily KOS? Much to my surprise, it actually originated from the hallowed halls of Congress. Enter Congressman Edward J. Markey (D-Mass.)

“And in a particularly egregious play on American patriotism and American fears, we have also been told that the oil coming through this pipeline would enable us to reduce our dependence on oil imported from unfriendly Middle Eastern or Latin American nations.

“Last month, Canadian Prime Minister Stephen Harper even said that, ‘When you look at the Iranians threatening to block the Strait of Hormuz, I think that just illustrates how critical it is that supply for the United States be North American.’

“This appears to be a complete fiction, because under this bill, there is no guarantee that even a drop of the tar-sands oil and fuels will stay in this country.

“This is because many of the refineries where the Keystone crude will be sent plan to re-export the refined fuels.

It’s difficult to even know where to begin. But I now understood why my Twitter informant was spreading the word that Prime Minister Harper had “even admitted” we wouldn’t get the oil. Of course, the first thing to remember is that once the fuel is up out of the ground, contracted for sale and into the pipeline, Harper really has no say as to what happens to it after that. The list of additional things wrong with this incredible theory are too lengthy to list.

But to save you some time, Marlo Lewis at MasterResource has already assembled a full fisking of this fantasy, which I encourage you to read in its entirety. A small sampling:

Markey claims that without an export ban, Keystone crude will bypass rather than supply the domestic U.S. motor fuels market. That is implausible. Of the 1.2 billion barrels of finished petroleum products refined in the Gulf Coast region (PADD III) from January through October 2011, approximately half was sold in domestic markets. New supplies of Canadian oil will undoubtedly increase exports, but much of it will be used to offset declining PADD III imports of Mexican and Venezuelan crude.

Keystone XL opponents note that PADD III exports of finished petroleum products have increased rapidly in recent years. No dispute there. According to the U.S. Energy Information Administration (EIA), total U.S. exports of finished petroleum products “increased more than 60% since 2007 as markets have become more globally integrated,” and most of those exports came from PADD III.

But to view this as a market failure is deeply weird. Can you think of another U.S. industry that is castigated for becoming more competitive in the global marketplace?

As the author also notes, Congressman Markey attempted a deeply deceptive maneuver in pushing an amendment (a failed one) which would have made Keystone XL approval contingent on a restriction barring exports from the US of any Canadian oil shipped via the pipeline and mandating that all petroleum products made from Canada’s crude be sold in U.S. domestic markets. It was a rather shabby political trick trying to force Republicans to vote against an amendment ostensibly designed to make sure we reduced our foreign dependence.

Obviously this was completely disingenuous. As noted above, we’re already in a somewhat improved position where we can export a fair amount of processed petroleum products as supply allows. Refiners who’ve paid for the crude they refine sell those finished products to markets. When demand is low in this country, refiners seek markets elsewhere. They have to. The alternative is to ramp down production, lay off workers or even close up operations entirely. Because so much of the cost of a gallon of gas is the underlying cost of the crude, refiners are working on thin margins anyway, and to say they should create oversupply in this country (to exert downward pressure on pump prices) would put them in negative territory financially.

Forcing companies to either sit on it or sell it at bargain basement prices where it’s no longer profitable rather flies in the face of basic capitalism, doesn’t it? Besides… weren’t we supposed to be increasing our exports and improving our trade balance? I’m sure I heard somebody say that.

At any rate, now you’re up to date. So when you hear people talking about the great Canadian conspiracy to shut us out of the global oil trade, you’ll at least know where it came from.

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