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Canadian Oil and the 2012 U.S. Presidential Election

By Marty Aquino

SEATTLE, Friday, February 17, 2012 (www.PoliticsWatch.com)

The Thirst

(Politics Watch) - Does the U.S. want a reliable source of much needed energy? The question historically for the U.S., has never been whether they need it or not, but where it should come from. The United States imports a staggering 11.793 million barrels per day and 57 percent of that incredible import number comes from OPEC and Persian Gulf countries, according to October 2011 data from the U.S. Energy Information Administration. What’s worse is doing business with the Middle East has often come with a longstanding history of unrest including, but not limited to fuel shortages and unpopular wars. Why then was there even a hesitation when it came to the Obama administration “green-lighting” Canada’s Keystone XL project?

The Nearby Well (in “Friendly-Territory”)

Canada’s number one export is energy. Of the export-commodities, crude oil, noncrude oil, and petroleum gases – almost exclusively natural gas comprise about 90 percent of Canada’s energy exports. Canada has the ability to push those exports nearly anywhere else in the world, but has historically exported the vast majority to its very thirsty neighbor to the south. The Keystone Pipeline project was developed to help answer America’s need for oil as well as providing a safe-alternative to imports from the conflict-frequent Middle East region. The pipeline represents an opportunity for the U.S. to secure a reliable source of energy from a historically-loyal and politically-friendly country. The Keystone Pipeline remains the best option for producers to supply crude oil to U.S. Gulf Coast Refineries. Contrary to the opposing environmentalists, pipelines are the safest way to transport oil. Moreover, the $7 billion deal will give the U.S. energy and create thousands of jobs. “Little change will take place in the dependence of the U.S. transportation sector on liquid fuels,” stated Anthony Cordesman, an official for the Center for Strategic and International Studies, pointing to the data-supported outlook showing America’s continued dependence on oil for the next several decades – despite the increases in alternative sustainable fuels. So, why wasn’t the project welcomed with open arms?

Unnecessary Presidential Politicking

As most truthful answers go, it’s a bit complex: Yes, the Obama administration denied the permit to build the Keystone XL pipeline. However, the administration was also quick to point out this doesn’t necessarily mean the president is against the Keystone pipeline. The underlying cause may be linked to the Republicans trying to force his hand last December. The Republicans demanded that an extension of payroll tax cuts be approved in connection with setting a deadline for the Keystone project. Obama’s decision postpones the next review of the project until after a number of environmental reviews – most likely well after the presidential election in November. Unfortunately for the U.S., however, Keystone should be approved and not used as some sort of political gambit during an election year. It is the type of stimulus that the U.S. has been trying to foster since the recession hit in December 2007: a $7 billion private-sector-funded project that will create thousands upon thousands of jobs in the process and the American populous overwhelmingly support it. According to a new poll taken by the National Journal a week after the State of the Union Address, 64 percent of respondents favoured its construction, while only 22 percent opposed it.

Hypocrisy

Two years ago a similar oil sands pipeline, known as the “Alberta Clipper,” moving fuel from Hardisty, Alberta in Canada to Superior, Wisconsin in the U.S. was built with the president’s blessing – a fact that Republican members have not forgotten. They have been arguing fiercely that Keystone is a way to reduce the country’s dependence on Middle Eastern oil. Even some Democrats have shown support of the Keystone project, Mark Udall, D-Colorado, in a National Journal article said, “I think there is a legitimate argument that it’s in the national interest to build the pipeline.” He, too, alluded to the double-talk of the current administration also pointing to the previous Alberta Clipper approval. “It speaks to the fact that the Keystone XL debate has been infused with presidential politics.”

GOP United

All of the Republican presidential candidates have been using the Keystone Pipeline project as a part of their respective battle cries. Newt Gingrich officially stated in Florida, “approval of the project would be the first priorities as president.” House Republicans have made the approval of the pipeline a central goal this year. Still, other Republicans point to the fear of economic competition with China, which will be the likely replacement-recipient of the Canadian oil without the Keystone plan. The Republican presidential candidates will be counting on the many companies and labour unions around the country already gearing up and hiring workers dependent on the project’s approval.

The Options and The Risk

Yes. The Keystone Pipeline has been and continues to be mired in political agendas and Capitol-Hill-chess-playing. Yes. It’s likely that deep-down both parties see the Keystone benefits. However, the inherent risk with the Obama administration Keystone-decision is a big one because there is another pipeline headed west with final destinations in Asia. Together with Keystone, Canada will be able to potentially move 1.625 million barrels per day with those two pipelines alone. And, data from the Canadian Association of Petroleum shows total production will hit 3.5 million barrels per day in 2015, 4.2 million in 2020, and 4.7 million in 2025.

“So throw the politics out of the window. Canada has enough to fill both pipelines. And, to get caught up in the trivialities of politics and environmentalism surrounding this development is to seriously take your eye off the ball,” stated Nick Hodge, an editor for “Energy & Capital” and an alternative energy speculator. He continues, “there's a reason China invested $16 billion in Canadian energy in the past two years and $6 billion in the U.S. in just the past few weeks... A major oil production boom is underway.”

At the end of the day, Canada has a commodity that every industrialized and emerging-market country wants desperately – like China. Many Chinese venture capitalists are taking advantage of the chaos ensuing after the Keystone XL fast-track denial. Following their bold venture into Africa, which is now paying off quite lucratively for the Chinese, the enterprising venture capitalists are contemplating the same move into Canada. Canada-Chinese trade is booming, but China currently has a trade surplus – a surplus that could be offset by major energy exports. In other words, friendly, stable and loyal Canada has options and the U.S. has the risk of losing out if Keystone goes unapproved for too long. Conversely, Canada need not wait too long before exercising the option to ship its “black gold” elsewhere.

 

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