Bill McKibben is outraged that the Keystone pipeline has been pushed through while the world suffers from the coronavirus. He might actually have a point that it’s a bit cute to get the approval done while so many are enforced out of action.
It’s also still true that the economics of the pipeline are still there, still make sense. The global oil price is somewhere in the $25 to $30 a barrel range now (who the hell knows what it will be by the time I print this). The price of that Canadian oil at Hardisty, the WCS price, is somewhere near $4.
That $21 to $25 price difference is the thing the Keystone pipeline is trying to address. For Ricardo was right, tradeable commodities will be the same price everywhere. The price to producers will thus be that one price minus transport costs to get to anywhere. There are few pipelines out there on the Canadian prairies, certainly not enough of them to carry away the local oil production. It thus travels by train, making a fortune for Warren Buffett’s Burlington Northern. Whoop, Whoop.
Those trains are expensive, the price difference between WTI (oil in Texas price) and WCS (oil in Canada price) is the cost of that rail transport.
No, it’s not exactly and only and wholly like this but it’s close enough that this allows us to understand what’s going on. So, build the pipeline and the price at Hardisty of that oil rises. Buffett doesn’t make so much money, Boo, Hoo.
At which point McKibben tells us:
and pretending that they are “essential” employees in order to build a pipeline that would carry oil no one wants or needs,
If no one wants or needs the oil then why are they willing to pay $25 a barrel for it in Texas? Heck, why are they willing to pay $4 for it in Canada? That people are willing to pay anything for it tells us that some people at least do indeed want it – whether they need it being something for the individual doing the wanting to decide of course.
Or if he means the pipeline well, why are people willing to pay $8 billion and up to build it if no one wants or needs it? Even by government standards that’s real money so there must be at least some estimation, somewhere, that some people desire this to happen.
This being what McKibben is missing. Sure, he doesn’t think that anyone should want oil, or need it. He’s even got a lovely plan – we should all be poorer – so that we don’t get it either. But some people do indeed want it, that oil, which is why people are spending eight large to build the pipeline to get it to them. The very economics of the project he’s decrying prove that his base assertion is incorrect.
And, you know, shouting at numbers because they disagree with you is not known as a greatly productive endeavour.