CANADA ALBERTA FORT MCMURRAY 20JUL09 - Aerial view of Syncrude Aurora tarsands mine in the Boreal forest north of Fort McMurray, northern Alberta, Canada.

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Lower Oil Prices Strengthen the Case Against Keystone XL

This article was originally published at BecauseFinanceIsBoring.com

Plummeting oil prices are often bad news for climate activists, as they can increase consumption, and slow down the transition to renewables. But there’s also a strange silver lining to lower oil prices: it strengthens the case against Keystone XL.

In January 2014, the U.S. State Department released its final Environmental Impact assessment for the Keystone XL pipeline. (If you need a refresher: Keystone XL is a pipeline that would bring Canadian tarsands through the United States, to be refined in Texas. It only creates 35 permanent jobs). One of the flawed assumptions made in this assessment was that whether Keystone XL was built or not, Canadian tar sands will most likely be brought to the global marketplace.

Plummeting oil prices shows that assumption to be false.

In the State Department’s assessment, they assumed that WTI (“West Texas Intermediate,” a type of crude oil used as a benchmark) prices will exceed $105 by 2020. But Wall Street’s expectations for the price of oil in 2020 were far lower than that in early 2014, and they’re even lower today. As of December 4th, the expectation for the price of WTI in June 2020 was $76.42.

Oil Change International has pointed out that the tar sands producer Southern Pacific Resources has been attempting to ship the tarsands oil entirely by rail…and they’ve been going broke on that attempt. Falling oil prices will exacerbate the problem, because the hefty cost of transport by rail will not be offset with enough revenue if oil prices stay low.

The State Department’s assumption that continued expansion of tarsands oil is inevitable was wrong in January. And falling oil prices have proven it’s especially wrong now.

For more discussion on this topic, you can listen to a debate Alexis Goldstein had with David Kuo on BBC’s Business Matters show.

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