Friday, January 30, 2015

Keystone and drilling

Lots going on these days! First, the Prez proposed allowing drilling in the southeastern US while disallowing it in Alaska. On first glance, this seems like a good balance: allow drilling in some places and not others. And maybe that's really what this is. On the other hand, a writer at the Brookings Institute (which is usually pretty centrist politically) bashes the decision as unnecessarily painful for Alaskans, who are almost all dependent on extractive industries, while sacrificing important natural areas in the southeast. I'd like more evidence and less indignance  in a rebuttal to the President's move, but it's still interesting. (Which is really more environmentally sensitive? Which really matters more to the nearby people?)

Speaking of how changes in extractive industries affect nearby people, Venezuelans are suffering from low oil prices too....

Finally, the results of a recent poll show that Americans generally support government action on climate change. Half of Republicans and a much higher share of Democrats support action, and most feel that they themselves are likely to suffer because of it if nothing is done. It's pleasing to see reality setting in! One last one after the fold....

Lastly, an interesting report on the Keystone today. Major Republican donors the Koch brothers own a huge chunk of the oil sands, so getting the pipeline approved will save them a lot of money. Personally I'm not too sure why this matters much, but the article is interesting to me as it reports on a few of the impacts of Keystone that we had speculated on. First, as we agreed, Keystone "will create competition among rail and other pipelines and lower transportation costs for all oil sands producers, bolstering profit margins and making additional reserves economically viable." Obviously it would represent a cheaper option, or they wouldn't be interested in doing it. To me the interesting economic question is how many additional reserves would become economically viable: in other words, how much of the tar sands mining project is actually dependent on the approval of the pipeline? No one can really answer that, in part because it depends on things like the price of oil as much as the transportation cost. Also, what is the second best alternative? Is the other pipeline we discussed, the one that goes west to Vancouver, simply too pricey to be worth it? If so, how much would it cost to continue to ship out oil via rail? The article lists a cost of a couple of additional dollars per barrel.... Finally, the tar sands currently are the source of about 2 million barrels a day, but if conditions are right that could nearly double to 3.8 million by 2022. Part of that ramp up is more or less certain, but part of it probably is not. How much of a difference would Keystone make? That is the question.

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