A Look at the Keystone XL Export Argument

Kyle Isakower
Posted February 9, 2012

One of the more ridiculous arguments against the Keystone XL is that the pipeline is really just about exporting crude oil and petroleum products to China.  Let’s go to the facts:

Here’s a breakdown of the U.S. crude oil supply in 2011 – using data from the Energy Information Administration (EIA).  We see that 99.7 percent of the crude oil produced or imported into the U.S. was processed here.  We simply do not export crude oil in any significant way.  Nor is that likely to change.

According to the EIA, increased imports of Canadian oil sands crude oil would likely replace declining heavy crude imports from Mexico and Venezuela and Ecuador (the two OPEC members in Latin America).  Heavy crude imports from those countries are 900,000 barrels per day lower than their 2005 levels and are projected to decline by an additional 540,000 barrels a day by 2020 and 845,000 barrels a day by 2035.  Because of these declines the additional Canadian crude arriving in the U.S. Gulf via the Keystone XL pipeline wouldn’t be likely to create a surplus.  In the review of the Keystone XL project the EIA concluded that “Without a surplus of heavy oil in PADD III, there would be no economic incentive to ship Canadian oil sands [crude] to Asia via Port Arthur.”

So like I said in the beginning, the idea that we will be exporting en masse the crude oil transported by the Keystone XL pipeline is a particularly ridiculous bit of politics.

Now on to the petroleum products.  What are those, anyway?

Refineries manufacture a variety of products from a barrel of crude oil – gasoline, diesel, heating oil, bunker fuel, etc. and they need markets for every product they produce.  We are our own best customer, but the U.S. has a long history of exporting certain petroleum products and importing others to balance refinery outputs and global demand.  Most of the products exported are not on-road fuels like gasoline and diesel (ULSD). In fact, exports represent just 8 percent of the motor gasoline and ULSD produced in the U.S.

Any petroleum products exported are still refined in U.S. refineries by U.S. workers, and the U.S. benefits from an improved balance of trade from any and all exports such as grains, steel, machinery and ethanol.

Stopping refiners from exporting products with low U.S. demand will have little positive effect and will threaten their ability to remain competitive globally.  U.S. refineries need a global trade in petroleum products to balance supplies and preserve U.S. refining jobs. And having a stable, secure source of crude oil, such as from Canada via the Keystone XL, enhances U.S. energy security regardless of how much may ultimately be exported as product, because those exports can be reduced or eliminated in times of crisis.

Which brings us to President Obama’s recent State of the Union address, in which he touted domestic manufacturing, secure energy and exports as key building blocks for the future.  Those are the words.  Meanwhile, down the street members of the president’s own party are pushing an effort to curb exports by a domestic manufacturer that would result in less energy security.  These are the actions.

This political dance of promising one step forward while taking two steps back has got to stop – we need to be moving forward.