John Phipps: Did Biden's Decision to Block Keystone XL Pipeline Permit Cause Gas Prices to Rise?
U.S. Farm Report 11/20/21 - Customer Support
During U.S. Farm Report Customer Support segment last weekend, Dave Fenn in Curtis, Washington asked John Phipps the following question:
“The economy is a very complex web, but do you really believe that campaign statements and early actions by the Biden administration had no effect on fuel prices? Stopping two major pipeline projects, restricting drilling on federal lands and the general animosity toward carbon fuels production had no effect on prices? Just coincidence?”
In response, John Phipps said:
Dave, they may have had some effect but not much, I think. The impact of the pipeline completion was always years in the future. Gasoline prices follow current oil prices, and some other factors like inventories and refining capacity. If Biden were to reverse course tomorrow, it would years for KXL oil to reach refineries in TX. Even then because tar sands oil is heavy and sour requiring specific refineries, most experts expected it would be used replace Venezuelan imports, a similar kind of petroleum. I’m guessing the other pipeline you refer to is Minnesota #3 replacement line, which is about ¾ finished, and has not been cancelled yet. If it comes online the old #3 pipeline will be closed so it will provide little new capacity. The economic impact of opening drilling on federal lands is even farther in the future.
I showed this last week in a different form, but due to tight oil (fracking), which is still 15% below 2020 but increasing thanks to $80 oil, our petroleum imports are virtually matched by our exports, mostly as finished products like gasoline and liquid natural gas. We aren’t sending gobs of money to OPEC+, Saudi Arabia, or the other Persian Gulf countries. We’re buying mostly from Canada and Mexico. It is hard for those of us who remember the ‘80s to comprehend the US as a net petroleum exporter, but we are close. Worries about dependence on imported oil have little basis.
One reason we’re both buying and selling is our refinery locations – many around the Gulf and few on the coasts. Supply doesn’t match up well with where people want to buy gas. Often importing or exporting makes the most sense. Also remember the US has not built a new refinery since 1977. Location is a thus big factor in gas prices, as well as state taxes. If the KXL pipeline cancellation has any impact on gas prices today, it is trivial compared to current oil economics and domestic oil production.
