05/22/2012 01:03 pm ET Updated Jul 22, 2012

Report: Keystone Tar Sands Pipeline Will Raise Gas Prices and Cut Oil Supplies

Despite all the industry hype over jobs and purported energy security benefits from building the Keystone XL tar sands pipeline -- benefits a Brooklyn bridge-builder could propose -- a new report shows the mammoth Canadian tar sands pipeline will cut the amount of gasoline produced in the U.S. and jack up gas prices for American drivers, especially in Midwestern, Great Plains and Rocky Mountain states.

That’s right, the dirty oil pipeline from Canada will not only threaten North America’s greatest drinking water sources like the Ogallala Aquifer, slashing through the fertile farmlands and cattle country of America’s agricultural breadbasket, but it will boost the price at the pump for consumers struggling to pay for gas prices near historic highs.

The report, "Keystone XL: A Tar Sands Pipeline to Higher Oil Prices," lays out the facts that the oil industry doesn't want Americans to understand -- the controversial TransCanada pipeline will ding consumers at the pump and cut oil supplies whose price is now discounted in the Midwest and in the Rockies. Here’s an excerpt from the report produced by NRDC, Oil Change International and ForestEthics Advocacy; :

Keystone XL will take oil currently refined in the Midwest and Rockies and send it to the Gulf Coast where it can be sold on the international market. Oil supplies dedicated to the United States will decline while the Keystone XL pipeline provides the international market with access to that Canadian crude previously meant for the U.S. market. This will have a powerful impact on oil prices in the Midwest and Rockies -- increasing the price of Canadian crude by $20 to $30 a barrel in the 2012 U.S. market, while doing nothing to decrease world oil prices.

The bottom line is that Gulf refineries are clamoring for crude they can turn into diesel, the most lucrative petrochemical product right now on the international market. Here's how NRDC's Anthony Swift describes it in his recent blog;

Keystone XL is going divert crude oil from the Midwest, a region of the United States where refineries are designed to produce as much gasoline as possible from a barrel of oil, to the Gulf Coast of Texas, where refineries have reconfigured themselves to produce as much diesel as possible from a barrel of crude.

These differences are due to recent changes in the world market for oil and refined products. Historically gasoline commanded higher prices than diesel, driven largely by increasing U.S. consumption. That has changed over the last ten years as U.S. gasoline consumption has plateaued, due in large part to increasing automobile efficiency standards, and global demand for diesel continues to rise. Today, diesel commands a higher price than gasoline, particularly in the international market.  

So we're going to take oil out of Midwest refineries producing gasoline for U.S. consumers and ship it to Gulf refineries which are focused on making diesel fuel for the international market. Sound like a good deal to you?

Well it doesn’t to people like Texas landowner Mike Hathorn, a welder concerned about his family’s property in his east Texas hill country home near Wells. That’s where TransCanada wants to run its 1,700 mile Keystone XL pipeline to the Gulf, straight through his family's river-fed land that he says now is threatened by a foreign corporation -- and by foreign oil. 

Hathorn says he's always been worried about the environmental risks the toxic tar sands brew will pose in this water-rich community. But concern over increases in gas prices is just icing on the cake to this proud Texan. “It doesn’t surprise me one bit,” Hathorn says in his thick Texas drawl. “This pipeline project isn’t helping people out here in the U.S. any. It’s just a Canadian company trying to use the U.S. as a route to get its oil out on the international market. We’re the ones having to take the risk. If it’s going to raise gas prices, then it’s just one more reason not to build it.”

Check out Mike Hathorn’s video and other videos of landowners, farmers, ranchers and citizens opposed to the expansion of tar sands mining operations and pipelines at NRDC’s new website Voices Against Tar Sands.


Other reporters have latched onto this oil price conundrum, too. Here’s Bloomberg columnist Jonathan Alter in a recent report:

TransCanada’s plan to jack up oil prices is hiding in plain sight. In the appendix to its application to the Canadian National Energy Board (helpfully provided to me by the Natural Resources Defense Council), the company brags that its project is “expected to realize an increase in the heavy crude price of approximately $3.00 per barrel by avoiding a discount” at the U.S. Gulf Coast. The market price of heavy crudes should rise an additional $3.55 per barrel when the new pipeline “relieves the oversupply situation in the Midwest.”

Of course, TransCanada made the claim in 2009, when the discounted price for Canadian crude was only $3 a barrel. In 2012, that discount has skyrocketed to between $20 to $40 a barrel. And that’s why the tar sands industry wants Keystone XL so badly -- it means adding tens of billions of dollars to the annual price of their product, billions that would be paid by you and me.

These are facts that are not widely shared by the oil industry, for obvious reasons. But reporters who dig into this come up with the same conclusions: you can’t cut the price of gas Americans pay by importing more toxic tar sands oil from Canada. In fact, the reverse is true; it will boost prices we pay at the pump by creating a conduit of crude to Gulf refineries eager to turn the heavy Canadian bitumen into diesel for export -- and turn a hefty profit doing it.

“Big oil and big money” is how Mike Hathorn explains it. And you can bet the American consumer -- and all who depend on a sustainable and healthy planet -- will be the last to benefit from the companies pushing this massive dirty tar sands oil pipeline plan.