Is Barack Obama telling the truth about the Keystone XL pipeline?
U.S. president says Canadian oil carried by the pipeline won't even stay in America. How true is that?
Because U.S. President Barack Obama will have to make a decision about the Keystone XL oil pipeline as early as this week, his comments on the hotly debated project tend to get plenty of scrutiny.
He's been increasingly dismissive of the importance of the project for his country, suggesting he'll make his choice purely on environmental grounds because it means so little to the U.S. economy.
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It won't lead to lower gas prices, nor create much work aside from thousands of temporary construction jobs, he said last week. And he emphasized one point in particular: Oil delivered via Keystone XL won't even stay in the U.S.
"It is providing the ability of Canada to pump their oil, send it through our land, down to the Gulf, where it will be sold everywhere else," Obama said. "That doesn't have an impact on U.S. gas prices."
Is that true?
Spoiler alert: The Canadian Press Baloney Meter is a dispassionate examination of political statements culminating in a ranking of accuracy on a scale of "no baloney" to "full of baloney" (complete methodology below).
This one earns a rating of "a lot of baloney" — the statement is mostly inaccurate but contains elements of truth. Here's why.
The facts
The United States has mostly banned exports of crude oil, ever since the energy crisis of the 1970s. That ban doesn't necessarily cover Canadian crude, as it could be eligible for export with a special licence.
The U.S. still consumes way more oil than it can produce, and remains a net importer.
Despite a surge in domestic production that now has the U.S. extracting almost 9 million barrels of oil per day, the country consumes more than 18 million barrels per day. That's according to the U.S. Energy Information Administration, which projects that the country will continue to be a net importer for the foreseeable future.
Canadian oil is increasingly dominant among those imports, now overtaking the total amount the U.S. brings in from all OPEC countries combined.
Keystone XL is designed to carry more than 550,000 barrels per day to the Gulf of Mexico — a big oil-transformation hub whose refineries have a capacity of more than 8 million barrels per day.
Nearly one-third of that oil refined on the Gulf gets exported — about 2.69 million barrels a day in 2013, according to the EIA.
That's because exports of finished petroleum products are allowed from the U.S. including diesel, gasoline, rocket fuel and plastics products. Those exports are rising rapidly — having shot up seven-fold since 1990 and tripling in the last seven years alone.
Many of these products are owned, and exported, by American oil companies. Dominant refineries in the region include Texas-based Valero Energy Corp, Exxon Mobil and Marathon Oil Corp.
What they say
A major study by Obama's own State Department said of exporting crude oil through Keystone XL: "Such an option appears unlikely to be economically justified for any significant durable trade given transport costs and market conditions... Gulf Coast refiners have a significant competitive advantage in processing it compared to foreign refiners because the foreign refiners would have to incur additional transportation charges to have the crude oil delivered (there)."
The report added a caveat, with respect to finished petroleum products: "It is possible that (Canadian) heavy crude may be refined in the United States and processed into petroleum products that are exported... As this may already be occurring, it may continue with or without the proposed project."
Valero Corp. says something similar. Echoing the U.S. State Department review, it says it won't export Canadian crude, but concedes that an unspecified share of its finished product from Canada might wind up abroad.
"Valero has said repeatedly that it has no intention of exporting Canadian crude oil from the Keystone XL pipeline. Valero intends to process that crude oil at the Port Arthur, Texas, refinery, which is set up to process heavy grades of crude oil and has been doing so for decades," company vice-president Bill Day said in an email.
"As for refined products made from crude oil, Valero already exports a portion of the refined products it makes, without Keystone XL. The significant majority of the products Valero makes stay in the United States for domestic consumption."
The anti-Keystone group Oil Change International, however, says that Canadian oil might wind up becoming redundant in the Gulf area and shipped overseas. It says it risks being squeezed out of the action there, because refineries belonging to state-owned companies from Venezuela, Mexico and Saudi Arabia control more than one million barrels a day of production in the Gulf, while domestic supplies of tight oil skyrocket.
Energy economist Andrew Leach agrees with some of what Obama says about Keystone's impact on the American economy, including that it won't lower U.S. gas prices. And the thousands of temporary construction jobs? Leach describes that as "a rounding error" for a U.S. economy that created 214,000 jobs last month alone.
But he says the president's wrong on exports.
"There's basically zero chance you're going to see crude exports in any significant quantity, regularly, off Keystone XL," Leach said in an interview.
What about the prospect of Canadian oil being transformed and shipped abroad as a finished product? Leach said that logic could be used to denigrate any raw material, being imported anywhere for use in manufacturing products that could eventually be shipped overseas.
It could even be used for the other oil refined on the Gulf Coast, which Keystone XL is supposed to help supplant, said Leach, a professor at the University of Alberta.
"If you believe the logic that Keystone XL crude is for export, because the diesel or the gasoline might be exported, then you also have to believe that Venezuelan crude that's currently being imported into the U.S. is just transiting the country — it's just imported for export purposes. Which is an argument that no one would make," he said.
"And if you think that claim is ludicrous on its face, then so is the claim that Keystone XL oil is simply for export."
The verdict
Key players in the project insist they won't ship Canadian crude abroad. The State Department, tasked with leading the Obama administration's own review, concurs on the grounds that it would make no economic sense. The U.S. will import more oil than it exports, perhaps for decades to come.
The same guarantee doesn't extend to finished petroleum products. Nobody's offering any promises — let alone hard projections — about what share of the oil that flows through Keystone XL might eventually wind up abroad after it's been refined.
Those exports of finished products are already happening, they're on the rise — and they're being done by American companies.
For that reason, Obama's statement that Keystone XL is about Canada shipping its oil overseas through the U.S., not to it, contains "a lot of baloney."
Methodology
The Baloney Meter is a project of The Canadian Press that examines the level of accuracy in statements made by politicians. Each claim is researched and assigned a rating based on the following scale:
- No baloney — the statement is completely accurate
- A little baloney — the statement is mostly accurate but more information is required
- Some baloney — the statement is partly accurate but important details are missing
- A lot of baloney — the statement is mostly inaccurate but contains elements of truth
- Full of baloney — the statement is completely inaccurate