“On Tuesday, January 13, about 45 people gathered in front of Mead Chapel for a ‘rejection rally’ against the Keystone XL pipeline, joining over 130 rejection rallies nationwide. Encouraged by 350.org and 350 Massachusetts, rallies took place all across the country in the wake of Nebraska’s decision to allow the pipeline to pass through.” - The Middlebury Campus, “Students and Vermonters Rally Against - and For - the XL Pipeline,” Jan. 15
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For the last five years, since the commissioning of the Keystone XL pipeline, there has been spirited debate from every imaginable sector of the American public as to the pipelines benefits or lack thereof. As the 114th Congress prepares to push the pipeline through and President Obama threatens to veto any such order, it would appear that the debate is continuing its familiar path. However, one variable in the Keystone XL pipeline debate has changed since the issue came to the forefront of the news cycle: oil prices have undergone a sustained drop in price. So instead of picking an ideological side to the pipeline debate I am going to ask how lower oil prices affect the economic and emissions development of the Keystone XL pipeline.
Informed discussion has mainly revolved around the State Department Supplemental Environmental Impact Statement (SEIS). Though the study concluded that the pipeline would not substantially increase greenhouse gas emissions, there was one major exception to this statement. If oil prices hovered around the $65-$75 a barrel range, then the reduction in transportation costs accrued from the pipeline would tip the economics of Canadian oil production from red to black — thus increasing emissions. Now that oil is currently in the $45-$55 a barrel this point of discussion seems meaningless.
However, it is not the current price of oil that decides whether or not this project makes sense in terms of economics or emissions. It is the long-run price that determines the effect of a pipeline that could be in service for decades. The absolute impact of Keystone XL on both price and emissions depends on how global producers and consumers react to the oil price increase or decrease caused by the pipeline’s completion or lack thereof.
Lower oil prices reduce both the costs and the benefits of approving the Keystone XL pipeline by reducing the odds that it will ever be fully built or used. If prices are kept at their current low level, there is a very small chance that the Keystone XL pipeline will never get built because of the economics. This is highly unlikely though, because if Canadian production does not grow, the chances of sustained low prices decreases. The more realistic possibility is that the pipeline is approved and utilized. In this case, lower oil prices reduce the economic benefits without changing the climate effects of the pipeline.
However, the biggest takeaway from this debate is that both the climate damages and the economic benefits from Keystone XL are small in the grand scheme of climate change and the U.S. and global economies. A Keystone XL decision will not drastically alter the current science behind climate change or drastically affect the U.S economy. The debate says more about how we as a nation feel about the economy and climate change than what the science or economics says about this topic.
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