For North America, Keystone XL is a lot of things; it is a $5.3 billion investment in safe energy infrastructure, it is an opportunity to put 9,000 construction workers to work and it is a choice between secure, stable North American energy or a continued reliance on OPEC. To the contrary of what paid activist opposition says, Keystone XL is not an “export pipeline.”
The U.S. is an overwhelming net importer of crude oil. The International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) have both forecast the U.S. will still need to import oil to meet its domestic demand for decades, despite growing oil production in the U.S.
Today, the United States consumes 15 million barrels of oil per day (bbl/d) and imports eight million barrels. The EIA forecast in 2012 stated that the U.S. will continue to import 7.5 million bbl/d into 2035 to meet its needs.
The Keystone XL Pipeline is not a crude oil export pipeline — period. It is a supply line to U.S. Gulf Coast refineries — which have signed up to 20-year binding commercial contracts to receive oil through Keystone XL. This much-needed oil will allow refineries to create products that we all rely on every day — gasoline for our vehicles, aviation fuels, and diesel fuels to help transport goods throughout the continent.
It makes absolutely no sense for companies to purchase cheaper Canadian crude, and then pay (again) to ship that product overseas, while continuing to import higher-priced oil from the Middle East and Venezuela for refineries on the Gulf Coast to deal with the eight to nine million barrels a day that must be imported.
What does make sense is using the Canadian and U.S. oil transported by Keystone XL to serve domestic markets first, reducing transportation and energy costs, while reducing dependence on more expensive and potentially unreliable imports.
We are already seeing evidence of this happening, as indicated by the EIA graphic shown above, which shows that the United States imports eight million barrels of oil every day. Notice the decline in Nigerian imports. Nigeria typically exports light sweet crude oil to the United States. This decline was precipitated by increases in U.S. production of light sweet crude. In fact, Valero (a major U.S. refiner) has replaced all foreign sources of light sweet crude at its Gulf Coast and Memphis refineries with domestic production.
Valero stated earlier this year that, “over the past several quarters, Valero has exported less than 10 per cent of the gasoline it makes. The vast majority of what we make in the U.S. stays in the U.S.”
Keystone XL would allow Gulf Coast refiners to continue to displace over-sea crudes with more secure over-land sources of Canadian and U.S. crude.
What about China?
Some of our opponents have claimed that the crude oil from Canada and the U.S. will be shipped through Keystone XL and bypass the largest and most sophisticated oil refinery complex in the world, only to be put on to super tankers and exported to China. This is untrue.
In the past six years, through December, 2012, China had not received a single barrel of unrefined crude oil exported from the United States since 2005. To put that into context, the United States imports more than two million barrels of crude oil a day from Canada alone. Canada and Mexico are by far the largest buyers of United States oil production.
The freedom to choose
Polls have consistently shown that the American public, when given the choice, overwhelmingly prefer buying oil from Canada rather than the Organization of the Petroleum Exporting Countries (OPEC).
Historically, the United States never had the freedom to choose where it sourced its crude, but now things are much different. Today, the United States has the freedom to import oil from a secure, stable and friendly neighbour in Canada instead of higher-priced ‘conflict oil’ from Venezuela or the Middle East.