Right now, there appears to be a furious battle over the laying of a large pipe to connect Cushing, Oklahoma with the gulf coast of the United States. There have been, in the past, many heated arguments with reference to the transport of crude oil to parts here and there. Like air travel, it is a relatively benign process until something happens, and that something is of such import as to throw groups and communities – nay, nations – into complete and utter turmoil.
Never in my years on this planet have I heard the kind of anger, vitriol, and discontent over a particular oil pipeline project as that currently being directed toward the Keystone XL scheme. Everyone from the usual groups of activists to Hollywood (former) A-listers have sounded off on this subject.
Of course, a protest – or an argument – is never about what is being debated. It is what lies behind the argument that is the most interesting, and truest, factor.
Keystone XL is not about Keystone XL – it is about the oil sands. Full stop.
I need not belabor the point on the global oil industry, and its various interests, sub-interests and machinations. They are far too numerous to mention and to keep track of. To offer context, however, I offer the following thumbnail.
You have oil production and distribution companies, which are often figured among the largest corporate entities on the face of the earth. You have nations who have vast petroleum resources who, by and large, are economically a one-trick pony. You have a cartel of these nations that seeks to control the levels of production in order to maximize their revenue. You also have the developed, and developing, worlds that - by and large – use more of the stuff than they own, and are as dependent on the stuff as a heroin addict. No oil, no industry, no modern civilization.
For many OPEC countries, oil revenue is much more than income. It is survival. It is the means of maintaining control, and so long as the world beats a path to their door and is willing to pay large sums for the product, they will have the wherewithal to do as they please. In the case of Venezuela’s Hugo Chavez and some members of the House of Saud, this means clamping down on the home population, while lending support to activities that, to say the least, are not always simpatico with those in countries like the United States, Canada, and others.
It is not an ideal situation – and many developed democracies are left to choose between their ethics and their interests, between justice and jobs.
The accident of geology, geography, and other factors led to northern Alberta playing host to the world’s largest dinosaur graveyard. Once scientists figured out how to pull sand out of the liquid on an industrial scale, and do it for a relatively modest price, the world began to take notice. Success breeds success, and as companies and scientists worked to improve extraction from the Athabasca oil sands, the stuff has gotten cheaper and more plentiful.
The headline in the last few years has been for the US government to declare Canada second only to Saudi Arabia in oil reserves. Those in the know, however, are aware of the real story.
The 175 billion barrels attributed to Canada, as opposed to the 275 billion held by the Saudis, are to be taken, no pun intended, with a grain of salt. The number is based on what is technically and financially possible to extract here and now.
The cost of something, as well as its technical feasibility, is not immutable. Events and circumstances can often make yesterday’s improbability today’s commonplace occurrence – like air travel and telecommunications.
The Athabasca oil sands, in fact, do not contain 175 billion barrels of oil. This is a number produced with the caveats of “based on current production technology” and “economically feasible at these prices.” Change the technology, or the economics, and the numbers change.
So, exactly how much is in the oil sands? The best estimates state that if one were to extract every drop of crude from the deposits, you would have a number closer to 1.5 trillion barrels. To put this into context, that is an amount equal to half of the world’s known deposits of conventional oil (the stuff that gushes out of the ground like Jed Clampett’s ‘Texas tea’).
The accurate picture of Athabasca is that of almost 200 billion barrels you can lay your hands on right now, with the potential of quadruple that with the right technology and investment.
If you are the United States, heavily dependent on the stuff, with a weary population wishing to extricate itself from Middle Eastern politics and the need to make nice to people of dubious motives, you would clearly see the benefit of having your closest neighbor and ally possess more oil than all of OPEC, and be willing to ship enough of it to you to do as your heart may conceive.
To a certain extent, this is happening already. London Brent Crude trades at nearly $110 a barrel, while West Texas Intermediate is selling for almost $30 less. Many, including commentators at CNBC, have asserted that the deep discount for WTI is almost solely due to the flow of Athabasca oil down the pipe from Hardisty, Alberta to Cushing, Oklahoma.
Unfortunately, this is of little consequence to the people of North America, let alone to the world writ large.
Oil needs refining in order to be useful to the average consumer, and as circumstance would have it, the lion’s share of North America’s refineries are along the coast of the Gulf of Mexico, and not in Oklahoma. What is on the gulf coast, however, are ports – ports that accommodate big tankers, tankers that transport that $110 barrel oil that OPEC sells.
As you pay a King’s ransom to fill up your car, you say “That’s crazy! Why don’t we refine the cheap stuff instead?!” Well, that’s a splendid idea – provided that you can get the cheap stuff to the gulf coast refineries.
Now we come to Keystone XL – either praised or vilified depending on your position.
From a technical standpoint, the proposed pipeline would do two things. First, it would double the amount of oily liquid travelling from Alberta to the States. Second, and probably of more import, it would continue the trip straight to the Gulf of Mexico, and the refineries in question – refineries that produce the majority of the gasoline used in both the United States and Canada. As the pipeline passes relatively close to the Bakken shale formations straddling Montana and Saskatchewan, there is potentially even more fuel that can head that way.
If you are a consumer of gasoline, which - in essence – is anyone reading this piece, you may have cause for comfort. You may see a chance for it to become cheaper to fill your car, to take a trip, to buy fresh produce at your local supermarket, or to buy anything make with any percentage of plastic. As virtually every global recession for the last four decades has been (coincidentally) preceded by a nasty spike in the price of oil, you might also feel that your home and your family’s income would be more secure.
Ahh – what’s not to love?
Well, if you are a Prince in the House of Saud, you are looking at a bunch of Canucks who are prepared to undercut your price on the one thing that pays the freight for your government and society. Lose your biggest customer, and you’ll be scrambling. But hey, what’s to worry with hundreds of radicalized Wahbbists who want to do away with anyone but a true believer. I mean, can the people who produced the likes of Osama bin Laden really be that bad?
Among the more pure of heart and thought, however, this is not good news either. If you are someone who strongly feels that the burning of fossil fuels is forcing the planet into an irreversible apocalypse, the notion of making oil cheaper and more plentiful is not good either. After all, how can you convince people to convert their energy consumption to ‘renewables’ when oil is selling at a heavy discount? It means that getting anyone other than the keenest and most avant-garde research establishments to invest in building a better, greener, mouse trap will be an increasingly difficult task. There are, of course, the running concerns surrounding the impact of oil sands extraction, as well as the safety of the pipelines in question.
Recently, the Kingdom of Saudi Arabia took the unprecedented step of hiring legal representatives to ask the Canadian Broadcast Standards Council to prevent ads from the group “Ethical Oil” from airing ads on various networks. Granted, they were none to flattering from the Saudi perspective, but they did not actually state anything that could not be demonstrably verified. Are women allowed to drive cars in Riyadh? No. Might not reflect well to a middle class Canadian audience, but it actually is true.
CTV made the move to not run the ads, but Sun News Network is, so the battle was half won by both sides.
Another salvo has been the running protests in Washington by groups concerned about the environmental impact of the Keystone XL project. Aboriginal groups, celebrities like Daryl Hannah, and the like, have been trying to assert pressure on the White House not to proceed with the project. Given the State Department’s endorsement of the plan, as well as the still undetermined impact of the “Arab Spring” on OPEC oil, the odds of an approval are probably better than 50/50.
To show the scope of the issue, groups in the UK were publicly calling on Prime Minister David Cameron to take a tough stand on his current visit to Ottawa. They know that if Athabasca crude can reach the gulf coast, it can get on a boat, and it can go anywhere in the world with a shoreline and a pier.
The Canadian government, of course, is not a dispassionate bystander in all of that. Recent pronouncements by Ministers such as John Baird have made the policy quite clear – the world wants Canadian oil. We can approve a pipeline and sell it to the States, or we can lay pipe to Prince Rupert and sell it to China, India and Japan. Your call.
A pipeline measures only about so much in diameter. You can’t see it from space, let alone from a half-mile away in most cases. Unless they fail structurally, they receive little or no notice. And yet, in this particular instance, there is the real possibility that a strand of pipe can change geopolitical and economic fortunes worldwide.
When so much of the world’s strategic relationships are now determined by where T-Rex and Brontosaurus chose to drop dead millions of years ago, are we really surprised that a prefabricated piece of tubing would do any less?
Whether one supports or opposes the plan, all can agree on one thing - it's a game changer.
Never in my years on this planet have I heard the kind of anger, vitriol, and discontent over a particular oil pipeline project as that currently being directed toward the Keystone XL scheme. Everyone from the usual groups of activists to Hollywood (former) A-listers have sounded off on this subject.
Of course, a protest – or an argument – is never about what is being debated. It is what lies behind the argument that is the most interesting, and truest, factor.
Keystone XL is not about Keystone XL – it is about the oil sands. Full stop.
I need not belabor the point on the global oil industry, and its various interests, sub-interests and machinations. They are far too numerous to mention and to keep track of. To offer context, however, I offer the following thumbnail.
You have oil production and distribution companies, which are often figured among the largest corporate entities on the face of the earth. You have nations who have vast petroleum resources who, by and large, are economically a one-trick pony. You have a cartel of these nations that seeks to control the levels of production in order to maximize their revenue. You also have the developed, and developing, worlds that - by and large – use more of the stuff than they own, and are as dependent on the stuff as a heroin addict. No oil, no industry, no modern civilization.
For many OPEC countries, oil revenue is much more than income. It is survival. It is the means of maintaining control, and so long as the world beats a path to their door and is willing to pay large sums for the product, they will have the wherewithal to do as they please. In the case of Venezuela’s Hugo Chavez and some members of the House of Saud, this means clamping down on the home population, while lending support to activities that, to say the least, are not always simpatico with those in countries like the United States, Canada, and others.
It is not an ideal situation – and many developed democracies are left to choose between their ethics and their interests, between justice and jobs.
The accident of geology, geography, and other factors led to northern Alberta playing host to the world’s largest dinosaur graveyard. Once scientists figured out how to pull sand out of the liquid on an industrial scale, and do it for a relatively modest price, the world began to take notice. Success breeds success, and as companies and scientists worked to improve extraction from the Athabasca oil sands, the stuff has gotten cheaper and more plentiful.
The headline in the last few years has been for the US government to declare Canada second only to Saudi Arabia in oil reserves. Those in the know, however, are aware of the real story.
The 175 billion barrels attributed to Canada, as opposed to the 275 billion held by the Saudis, are to be taken, no pun intended, with a grain of salt. The number is based on what is technically and financially possible to extract here and now.
The cost of something, as well as its technical feasibility, is not immutable. Events and circumstances can often make yesterday’s improbability today’s commonplace occurrence – like air travel and telecommunications.
The Athabasca oil sands, in fact, do not contain 175 billion barrels of oil. This is a number produced with the caveats of “based on current production technology” and “economically feasible at these prices.” Change the technology, or the economics, and the numbers change.
So, exactly how much is in the oil sands? The best estimates state that if one were to extract every drop of crude from the deposits, you would have a number closer to 1.5 trillion barrels. To put this into context, that is an amount equal to half of the world’s known deposits of conventional oil (the stuff that gushes out of the ground like Jed Clampett’s ‘Texas tea’).
The accurate picture of Athabasca is that of almost 200 billion barrels you can lay your hands on right now, with the potential of quadruple that with the right technology and investment.
If you are the United States, heavily dependent on the stuff, with a weary population wishing to extricate itself from Middle Eastern politics and the need to make nice to people of dubious motives, you would clearly see the benefit of having your closest neighbor and ally possess more oil than all of OPEC, and be willing to ship enough of it to you to do as your heart may conceive.
To a certain extent, this is happening already. London Brent Crude trades at nearly $110 a barrel, while West Texas Intermediate is selling for almost $30 less. Many, including commentators at CNBC, have asserted that the deep discount for WTI is almost solely due to the flow of Athabasca oil down the pipe from Hardisty, Alberta to Cushing, Oklahoma.
Unfortunately, this is of little consequence to the people of North America, let alone to the world writ large.
Oil needs refining in order to be useful to the average consumer, and as circumstance would have it, the lion’s share of North America’s refineries are along the coast of the Gulf of Mexico, and not in Oklahoma. What is on the gulf coast, however, are ports – ports that accommodate big tankers, tankers that transport that $110 barrel oil that OPEC sells.
As you pay a King’s ransom to fill up your car, you say “That’s crazy! Why don’t we refine the cheap stuff instead?!” Well, that’s a splendid idea – provided that you can get the cheap stuff to the gulf coast refineries.
Now we come to Keystone XL – either praised or vilified depending on your position.
From a technical standpoint, the proposed pipeline would do two things. First, it would double the amount of oily liquid travelling from Alberta to the States. Second, and probably of more import, it would continue the trip straight to the Gulf of Mexico, and the refineries in question – refineries that produce the majority of the gasoline used in both the United States and Canada. As the pipeline passes relatively close to the Bakken shale formations straddling Montana and Saskatchewan, there is potentially even more fuel that can head that way.
If you are a consumer of gasoline, which - in essence – is anyone reading this piece, you may have cause for comfort. You may see a chance for it to become cheaper to fill your car, to take a trip, to buy fresh produce at your local supermarket, or to buy anything make with any percentage of plastic. As virtually every global recession for the last four decades has been (coincidentally) preceded by a nasty spike in the price of oil, you might also feel that your home and your family’s income would be more secure.
Ahh – what’s not to love?
Well, if you are a Prince in the House of Saud, you are looking at a bunch of Canucks who are prepared to undercut your price on the one thing that pays the freight for your government and society. Lose your biggest customer, and you’ll be scrambling. But hey, what’s to worry with hundreds of radicalized Wahbbists who want to do away with anyone but a true believer. I mean, can the people who produced the likes of Osama bin Laden really be that bad?
Among the more pure of heart and thought, however, this is not good news either. If you are someone who strongly feels that the burning of fossil fuels is forcing the planet into an irreversible apocalypse, the notion of making oil cheaper and more plentiful is not good either. After all, how can you convince people to convert their energy consumption to ‘renewables’ when oil is selling at a heavy discount? It means that getting anyone other than the keenest and most avant-garde research establishments to invest in building a better, greener, mouse trap will be an increasingly difficult task. There are, of course, the running concerns surrounding the impact of oil sands extraction, as well as the safety of the pipelines in question.
Recently, the Kingdom of Saudi Arabia took the unprecedented step of hiring legal representatives to ask the Canadian Broadcast Standards Council to prevent ads from the group “Ethical Oil” from airing ads on various networks. Granted, they were none to flattering from the Saudi perspective, but they did not actually state anything that could not be demonstrably verified. Are women allowed to drive cars in Riyadh? No. Might not reflect well to a middle class Canadian audience, but it actually is true.
CTV made the move to not run the ads, but Sun News Network is, so the battle was half won by both sides.
Another salvo has been the running protests in Washington by groups concerned about the environmental impact of the Keystone XL project. Aboriginal groups, celebrities like Daryl Hannah, and the like, have been trying to assert pressure on the White House not to proceed with the project. Given the State Department’s endorsement of the plan, as well as the still undetermined impact of the “Arab Spring” on OPEC oil, the odds of an approval are probably better than 50/50.
To show the scope of the issue, groups in the UK were publicly calling on Prime Minister David Cameron to take a tough stand on his current visit to Ottawa. They know that if Athabasca crude can reach the gulf coast, it can get on a boat, and it can go anywhere in the world with a shoreline and a pier.
The Canadian government, of course, is not a dispassionate bystander in all of that. Recent pronouncements by Ministers such as John Baird have made the policy quite clear – the world wants Canadian oil. We can approve a pipeline and sell it to the States, or we can lay pipe to Prince Rupert and sell it to China, India and Japan. Your call.
A pipeline measures only about so much in diameter. You can’t see it from space, let alone from a half-mile away in most cases. Unless they fail structurally, they receive little or no notice. And yet, in this particular instance, there is the real possibility that a strand of pipe can change geopolitical and economic fortunes worldwide.
When so much of the world’s strategic relationships are now determined by where T-Rex and Brontosaurus chose to drop dead millions of years ago, are we really surprised that a prefabricated piece of tubing would do any less?
Whether one supports or opposes the plan, all can agree on one thing - it's a game changer.
