UK to encourage hydrofracking of natural gas.

Proposed U.K. government policies to encourage hydrofracking of natural gas ignited a firestorm of protest this summer, with critics complaining that they were not consulted and that rules will restrict local planners’ authority. But the country appears to have few other options. The United Kingdom is in an energy quagmire that is forcing it to turn to shale gas.

The country’s aggressive carbon emissions goals call for the U.K.’s power supply to be virtually carbon-free by 2030. But the government had been planning to slash emissions with low-carbon power strategies—new nuclear reactors and carbon capture and storage systems on existing power plants—that remain too expensive to build. And conventional natural gas from the North Sea that could buy time for the scale-up of renewable power is dwindling.

Cost matters to U.K. voters. Nearly three-quarters of its citizens are worried about climate change, according to a national poll released by the London-basedU.K. Energy Research Centre in July. But more than four-fifths told the researchers that they are “fairly or very concerned” that both electricity and gas will become unaffordable in the next 10 to 20 years.

If the U.K. can’t find an affordable supply of natural gas via hydrofracking of its shale deposits, it might have to restart mothballed coal-fired power plants to keep the lights on in future decades. “One way or another, we’ll muddle through,” says George Day, economic strategy manager at the Loughborough-based Energy Technologies Institute, a partnership between industrial firms and the U.K. government. “Whether we’ll hit our carbon targets is another question,” says Day.

Those targets would slash greenhouse gas emissions 80 percent by 2050 from 1990 levels. For the country to get there, the U.K. power industry would have to slash its carbon intensity from more than 500 to 50 grams of carbon dioxide per kilowatt-hour by 2030, according to the quasi-independent Committee on Climate Change. Under that committee’s roadmap, 60 percent of new cars sold in 2030 should be electric, rising to 100 percent by 2035.

Day and other government advisors project that such ambitious targets are well beyond what renewable energy alone can deliver, however. Britain’s solar potential pales in comparison to even Germany’s lackluster supply of sunlight, leaving wind power—principally from offshore farms—to carry the burden. “Do we actually have the industrial capacity to deliver 50-plus gigawatts of offshore wind within the next decade or two?” says Day. “That would be very difficult.”

Even some renewables advocates agree that the U.K. must pursue nuclear and carbon-capture technology as well. “It seems likely that you’re going to need all of the above,” says Briony Worthington, shadow minister for energy and climate change for Labour in the House of Lords. At the very least, says Worthington, the U.K. should seek new reactors to maintain nuclear’s 20 percent share of the power supply as a source of low-carbon energy.

The problem for the government is that investment in CCS and nuclear is, at present, nonexistent. To a large extent that is a failure of the European Trading System, which was intended to render low-carbon technologies competitive with fossil fuels. With the collapse of Europe’s carbon market, that incentive is missing.

To attract CCS and nuclear investment, the U.K. established its own carbon prices that are set to rise to £30 per ton by 2020 and £70 per ton a decade later. It has also proposed floor prices for low-carbon power, with the government topping up a generator’s revenues if the market price falls below a fixed threshold. To support CCS it has set aside £1 billion to defray the cost of building early CCS projects.

Still, investors are moving cautiously. Only two CCS projects are eyeing the government’s financing. A consortium led by Shell proposes to capture carbon dioxide from the Peterhead power station in Scotland and pipe it out to the North Sea for sequestration in a depleted oil and gas field. A second project would send carbon dioxide to the North Sea from a coal plant in North Yorkshire. Final investment decisions for those projects are not likely before 2014 or 2015.

Nuclear reactor construction is lagging further. While the government wants to see 16 gigawatts of new nuclear capacity operating by 2025, only one project is getting serious attention: a proposal by French power generator Electricité de France to build a 1,600-megawatt EPR reactor at the Hinkley Point nuclear station, whose 1970s-era reactors are scheduled to shut down in 2023.

Angela Merkel: Austeridad sustentada en la racionalidad mercantil.

La mujer razonable y poco dada a aventuras. La mutti (mamá) conservadora que se preocupa por el bienestar —y la cartera— de sus conciudadanos. La doctora en Física y política de indudable éxito que, pese a todo, sigue comportándose como haría cualquier hausfrau (ama de casa) alemana, que busca un momento libre en su jornada laboral para hacer un recado. Los democristianos alemanes han basado toda su campaña en la popularidad de su máxima líder y canciller. No es la ideología lo que hará ganar el próximo domingo a su CDU, sino la percepción de que en tiempos convulsos conviene dejar la nave en manos de alguien como Angela Merkel. Una persona que a dos días de unas elecciones que día a día parecen más igualadas entre el centroizquierda y el centro derecha encuentra tiempo para salir a hacer la compra a un supermercado del centro de Berlín.

No es la primera vez que se ve a la mujer más poderosa de Europa eligiendo tomates, verduras o vino. Los medios alemanes ya han publicado alguna foto de Merkel saliendo del súper. Y los clientes que esta mañana estaban en Ullrich, un establecimiento de gama media al lado de la estación de metro de Möhrenstrasse, unos dos kilómetros de la cancillería, no parecían muy extrañados ante una imagen que sería totalmente inusual en España, Italia o Francia. Nadie se dirigía a ella para felicitarla por ponerse dura con el sur de Europa o para recriminarle que la factura de la luz sea cada vez más alta. Cada uno iba a lo suyo como si Merkel fuera una cliente más. Solo se veía alguna cara sorprendida al reconocerla. “Sí, es ella”, le susurraba a su hija una mujer.

Empujando su carrito con gesto serio, la jefa de Gobierno y del partido democristiano hacía sus compras sin dar la impresión de tener mucha prisa. Aunque ayer estaba en un establecimiento frecuentado por la clase media, en otras ocasiones se le ha visto en la sección de quesos de las lujosas Galerías Lafayette. Tras pasar por la caja y cargar los alimentos en una bolsa que ya llevaba, la canciller salió del establecimiento pasadas las once de la mañana y se metió en el coche oficial. Un mitin en Hannover le esperaba.

Pese a que se trataba de una escena totalmente espontánea —este enviado especial se encontró la escena por casualidad, no había ni fotógrafos ni periodistas alemanes— la imagen que transmite Merkel en el supermercado dos días antes de las elecciones coincide a la perfección con la que su campaña quiere dar. Mientras sus rivales se desgañitan convocando una acción de 72 horas para arañar los últimos votos disponibles, ella sigue impertérrita, convencida de que pase lo que pase el próximo domingo, su partido seguirá siendo el más votado. Los electores podrán forzarle a pactar con los liberales, con los socialdemócratas o incluso con los verdes, pero salvo catástrofe imprevisible ella seguirá al mando. El candidato socialdemócrata, Peer Steinbrück, ha animado la campaña con titulares y gestos que se recordarán. Ella, no. Sabe que tiene las de ganar y no quiere arriesgar.

Su imagen es de una líder conectada a la realidad del ciudadano de a pie y que sabe cuánto cuesta un kilo de arroz. Mientras Steinbrück se vanaglorió de solo consumir vino que cueste más de cinco euros, Merkel va por la mañana a la compra en Berlín y por la tarde a Hannover con la misma chaqueta.

Los ciudadanos aprecian esta llaneza y cercanía de Merkel. Cuando se va de compras y pasea su aspecto de persona sin pretensiones, la mujer más poderosa del mundo se parece mucho a cómo los alemanes prefieren verse a sí mismos: un país fuerte, sí; pero austero y sustentado en la racionalidad mercantil de sus empresas, el trabajo duro y en las sencillas ecuaciones económicas del que va al súper. Es la filosofía de la famosa hausfrau suaba —pese a que su perfil vital tiene poco de ama de casa— que la canciller suele mencionar como el modelo para una política financiera prudente: algo tan simple como no gastar más de lo que entra casa.

Cuando Merkel impone sus políticas de austeridad en Europa, gran parte de los alemanes creen, con ella, que no hay alternativa. Cuando Merkel se niega a acompañar a sus aliados en las campañas de Libia o en una hipotética intervención militar en Siria, la aplastante mayoría de los ciudadanos de la tercera potencia exportadora de armas del mundo respiran aliviados desde el franco pacifismo.

En tiempos de crisis, Merkel capitaliza las simpatías de unos votantes que en periodos más tranquilos preferían perfiles más propensos al espectáculo. Al principio de la legislatura que ahora termina, el ministro más popular de su Ejecutivo era Karl-Theodor zu Guttenberg, un aristócrata multimillonario y apuesto, nacido en un palacio. El anterior canciller, el socialdemócrata Gerhard Schröder, se distinguía por su arrojo político ante decisiones impopulares. A Merkel no le gustan las aventuras por lo que conllevan de incertidumbre. El pronóstico para las elecciones parece ahora más abierto que hace unas semanas. Pero ella se negó ayer a romper su rutina de ir de compras los viernes. La rutina es lo contrario de la aventura.

Bakken Shale: North Dakota Fracking

Though North Dakota has historically had lower unemployment rates than the rest of the country, it barely felt a hiccup with the onset of the Great Recession. Not only have the number of jobs increased steadily in the region over the past decade, but the average take-home pay has increased at a healthy clip as well.

A big part of that is due to the fact that drilling in the Bakken Shale -- with its enormous oil deposits beneath North Dakota's soil -- has become a very profitable endeavor. In fact, in 2006, North Dakota ranked ninth in daily production of oil in the United States. In just seven years, it shot all the way up to second, behind only Texas. The state currently produces 821,000 barrels of oil per day. 

The big playersTwo players account for a large portion of business in North Dakota's oil fields. Continental Resources leases the most land of any oil company in the state, and stated last year that it plans to triple its oil output by 2017, with the Bakken shale accounting for most of this growth. Hess  also made a big splash in 2010 with a $1 billion land purchase.

At the same time, several smaller players are also turning a profit to the benefit of North Dakotans and shareholders alike. As Foolish colleague Matt DiLallo recently pointed out,Kodiak Oil & Gas and Oasis Petroleum have combined to go from producing about 4,500 barrels of oil per day in 2010 to more than 60,000 by the end of this year.

And even though the Bakken has been active for years now, the land grab continues. Just last month, Whiting Petroleum announced that it was buying 40,000 acres of land for roughly a quarter of a billion dollars.

Telling Washington to stay awayGiven the vested interest North Dakota citizens, politicians, and oil companies have in seeing the Bakken shale continue to produce profits, it's no surprise that the state is wary of the Obama administration's plans to institute nationwide regulations regarding the fracking process, which made this oil boom possible in the first place.

Expected to be released sometime in early 2014, these regulations will likely require disclosures of materials used in the fracking process, specifications to ensure safe well construction, and rules for the management and disposal of wastewater.

Though only 5% of oil in the United States comes from public lands, both sides of the aisle in North Dakota are fighting against intrusion from D.C. politicians. In May, a bipartisan delegation from the state claimed that these federal regulations were completely unnecessary.

"We believe we already have substantial regulations in place that allow for continued oil and gas production while protecting the environment and the health and safety of our citizens," Sen. Heidi Heitkamp (D-N.D.) said.  These regulations include the fact that fracking chemicals are already disclosed via the industry-standard website, Fracfocus.org.

Continental Resources CEO Harold Hamm also claims that while it only takes 30 days to get a drilling permit through North Dakota authorities, doing so through the federal government would take close to nine months. That kind of delay, he argues, inhibits efficient economic development in the region.  

No matter how the regulations play out, finding the right investments while historic amounts of capital expenditures are flooding the industry is crucial to padding your nest egg. You can get a comprehensive look at three energy companies set to soar during this transformation in the energy industry.

Cameron: We cannot afford to miss out on shale gas.

By David Cameron.

Fracking has become a national debate in Britain – and it’s one that I’m determined to win. If we don’t back this technology, we will miss a massive opportunity to help families with their bills and make our country more competitive. Without it, we could lose ground in the tough global race.

As with any advance in technology, fracking – drilling for so-called “unconventional” gas – has rightly drawn scrutiny. But a lot of myths have also sprung up. So today I want to set out why I support it – and deal with the worst of the myths at the same time.

First, fracking has real potential to drive energy bills down. Labour’s mismanagement of the economy means that many people are struggling with the cost of living today. Where we can act to relieve the pressure, we must. It’s simple – gas and electric bills can go down when our home-grown energy supply goes up. We’re not turning our back on low carbon energy, but these sources aren’t enough. We need a mix. Latest estimates suggest that there’s about 1,300 trillion cubic feet of shale gas lying underneath Britain at the moment – and that study only covers 11 counties. To put that in context, even if we extract just a tenth of that figure, that is still the equivalent of 51 years’ gas supply.

This reservoir of untapped energy will help people across the country who work hard and want to get on: not just families but businesses, too, who are really struggling with the high costs of energy. Just look at the United States: they’ve got more than 10,000 fracking wells opening up each year and their gas prices are three-and-a-half times lower than here. Even if we only see a fraction of the impact shale gas has had in America, we can expect to see lower energy prices in this country.

Secondly, fracking will create jobs in Britain. In fact, one recent study predicted that 74,000 posts could be supported by a thriving shale-gas industry in this country. It’s not just those involved in the drilling. Just as with North Sea oil and gas, there would be a whole supply chain of new businesses, more investment and fresh expertise.

Thirdly, fracking will bring money to local neighbourhoods. Companies have agreed to pay £100,000 to every community situated near an exploratory well where they’re looking to see if shale gas exists. If gas is then extracted, 1 per cent of the revenue – perhaps as much as £10 million – will go straight back to residents who live nearby. This is money that could be used for a variety of purposes – from reductions in council-tax bills to investment in neighbourhood schools. It’s important that local people share in the wealth generated by fracking.

The benefits are clear. But it’s also crucial to put to bed the myths. It has been suggested in recent weeks that we want fracking to be confined to certain parts of Britain. This is wrong. I want all parts of our nation to share in the benefits: north or south, Conservative or Labour. We are all in this together.

If neighbourhoods can see the benefits – and are reassured about its effects on the environment – then I don’t see why fracking shouldn’t receive real public support. Local people will not be cut out and ignored. We are issuing very firm guidance: firms looking to frack should make people aware of their plans well before they apply for a permit. Dialogue is important and if residents express specific concerns, then companies should take them on board. From my experience as a local MP, people tend not to oppose developments for the sake of it. But what they do object to is the idea that their neighbourhood should change without any say. We want people to get behind fracking, and a transparent planning process is an important ingredient.

Equally, we must make the case that fracking is safe. International evidence shows there is no reason why the process should cause contamination of water supplies or other environmental damage, if properly regulated. And the regulatory system in this country is one of the most stringent in the world. If any shale gas well were to pose a risk of pollution, then we have all the powers we need to close it down.

When all is said and done, though, one myth still remains – that fracking damages our countryside. I just don’t agree with this. Our countryside is one of the most precious things we have in Britain and I am proud to represent a rural constituency. I would never sanction something that might ruin our landscapes and scenery. Shale gas pads are relatively small – about the size of a cricket pitch. But more than that, similar types of drilling have been taking place for decades in this country without any real protest. The South Downs National Park remains one of the most beautiful parts of Britain, yet it has been home to conventional oil and gas drilling since the Eighties. The huge benefits of shale gas outweigh any very minor change to the landscape.

So my message to the country is clear – we cannot afford to miss out on fracking. For centuries, Britain has led the way in technological endeavour: an industrial revolution ahead of its time, many of the most vital scientific discoveries known to mankind, and a spirit of enterprise and innovation that has served us well down the decades. Fracking is part of this tradition, so let’s seize it.

American Sands Energy (AMSE) - Eastern Utah (Review by David Riedel)

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Oil sands are a critical source of oil for America. Canada is our largest source of imported oil sending two million barrels a day over the border. Half of that comes from oil sands.

There are extensive oil sands on the U.S. side of the border especially in Eastern Utah where it is estimated that 12 to 19 billion barrels of oil reside.

While fracking and natural gas get so much of the attention these days, oil sands have the potential to become a major domestic energy source.

One of the major challenges with mining and processing oil sands is the fact that traditional approaches use several barrels of water in the processing of one barrel of oil.  This is where one company is significantly different—its process uses no water.

American Sands Energy (AMSE) is a development stage company focused on oil sands deposits in Utah. It has licensed technology to process oil sands without using any water and at a cost well below competitive approaches. Since AMSE’s process uses no water, it creates no tailings or other waste that requires containment or permits.

AMSE is raising capital to build out a 5,000 barrel per day facility in Eastern Utah to process sands from mining claims that it owns or partly owns.  The company currently has 150 mn barrels of likely reserves that it controls and is confident it could add 500 mn barrels of reserves in the area quite easily.

American Sands has licensed technology from Universal Oil Recovery Corp., which has a proprietary solvent and process that allows for a very clean, low energy process that uses no water and results in no emissions or waste products. This technology has been tested on a pilot plant for the past two years and has proven to work efficiently. Once up and running in 2015 the plant will be at break-even at oil prices of $45/barrel (WTI crude is currently at $106 per barrel).

AMSE’s unique process mixes a proprietary solvent with the oil sands that separates the oil (in the form of bitumen) from the sand.  The sand is then re-heated allowing the solvent to escape and be recycled for reuse. The process results in clean dry sand that can be sold or used in mining operations and bitumen that can be used as is in road paving operations or processed into other products.

Risks include permitting risk, processing plant scale risks, considerable related party transactions and exposure to a commodity market.

American Sands is currently loss making and has a market cap of $10 million.  The company estimates that its total capital requirements are $70 million to put all of its properties into production.

We have estimated the company’s value using three popular methods for valuing development stage oil companies. Averaging these three estimates and adjusting for CAPEX and time to reach production provides a value of $58.8 million or $1.56 per share. We believe American Sands Energy is significantly undervalued and represents a unique way to play alternative energy sources in the U.S.

More in: AMSE Initiation Report July 2013.

Moran: US Incentive For Keeping Gulf Oil Flowing Will Diminish

By Michael Moran

The Persian Gulf has roiled the world regularly since the Iranian Revolution of 1979 – through an Iran-Iraq war, the Gulf War, bombings in Saudi Arabia and Yemen of US military targets, the Iraq War in 2003 and in 2011 the Arab Spring. In each cases, crises spawned in the Gulf sent shudders through global markets, sending the price of oil sky high and prompted US presidents to order naval task forces based half a world away to put to sea.

Yet by 2030, the incentives will have changed. Yes, the US Navy is still watching, warily. And because oil remains a global commodity where prices everywhere are vulnerable to small disruptions, America remains concerned about any problem that might disrupt the flow of oil and gas through the narrow Strait of Hormuz – the bottleneck that could in an instant take Saudi, Iraqi, Qatari, Kuwaiti and other energy supplies off the market. But it’s not the disaster it was in, say, 1991.

Over the next decade and a half the fleets that really care will no longer fly the Stars and Stripes. More than likely, warships from a host of Asian countries – Japan, China, India and others – will be regular visitors to the Gulf by that time. It will be these nations, not the US or its European allies, who have the greatest stake in preventing a calamity that could damage their economies.

For Americans, this may come as quite a relief. For decades, ever since Britain’s Royal Navy lost command of the seas after World War II, the US Navy has provided something of a free public utility by ensuring that global commerce is free to travel on the long, exposed sea lanes connecting major economies. In effect, American task forces are the Coumadin of the global economic circulatory system, preventing blockages and, occasionally, identifying potential tumors to be excised more urgently.

(Like that blood-thinning drug, of course, overdose and other misuse is possible. By and large, though, most of the world is happy for the US to spend billions annually to guarantee free movement of goods by sea.)

The incentives for the US to bear this particular burden are changing. According to the US Energy Information Administration (EIA), by 2030 the share of US oil consumption fulfilled by Persian Gulf sources will have fallen below 35 percent – and perhaps even further, given the new productivity of old US wells, new discoveries off Brazil and the shale gas and tight oil revolution in the US Midwest.

But South and East Asia is facing a very different future. For China, the figure in 2030 is 75 percent. For South Korea, Japan and Taiwan, the percentage is even higher. India’s suppliers are slightly more diverse, but even there over 60 percent of imports will flow from the Gulf in 2030.

Sliced a bit differently, the data leads IEA to project that Asian economies will be importing 90 percent of Persian Gulf oil by 2030. Indeed, higher prices for oil precipitated by a Gulf crisis – at some point – actually becomes a benefit to a country producing as much oil as the US will in 2030.

“From a strategic perspective, the “Achilles heel” of China is its over-whelming dependence on Persian Gulf energy imports to fuel its rapidly growing economy,” says Samir Tata, a former U.S. intelligence analyst and author on naval issues. “The sea lines of communication over which these vital oil and gas imports are transported by tanker … and the choke points linking them are controlled by the US Navy.”

The Obama administration’s “pivot” to Asia may be the beginning of an end to this free ride. Given the costs – both financial and political – of maintaining the US Fifth Fleet’s carriers, escorts and submarines in the Gulf, and the continuing pressure in Washington to curb expenditures, it may not be long before Asian nations have to figure out a way to guarantee their own oil supplies.

This means a very different reality on the high seas. Nature is always a threat in the deep ocean, of  course, but since World War II commerce has not feared political threats except in specific places relatively close to shore – the Red Sea off Somalia or the Gulf of Guinea on Africa’s West Coast, for instance.

That may change over the next several decades as new players start acting on new incentives.

China’s disputed claims to areas of the South and East China seas have garnered headlines of late, but the management of the vital energy sea lanes through the Indian Ocean and its multiple bottle necks is a probably a more important factor behind the growth of naval budgets in the region in recent years.

After all, China’s disputes with Japan, South Korea, Taiwan, Vietnam and others over territorial waters is about oil and may exist beneath them. National pride, of course, also plays a role.

But the vast stretches of Indian Ocean that all these nation’s oil and gas imports must traverse is, to put it in the lexicon of national security, a “clear and present danger.”

The most publicized manifestation of this trend was the launch last year of China’s first aircraft carrier, a refitted Soviet Navy leftover renamed Liaoning.

Regionally, Indian military leaders have also expressed concerns about a system of port projects along Indian Ocean basin funded or partly owned by China. Referred to in India’s press as the “string of pearls,” these port facilities stretch from Myanmar to Bangladesh, Sri Lanka and Pakistan – with Chinese contractors also building major port facilities in Tanzania and Mozambique. India has also been alarmed by the increased activity of Chinese submarines in nearby waters.

Of course, Chinese companies are involved in port operations around the world – including the Panama Canal. China denies it wants to encircle India – a charge that frequently appears on Indian op-ed pages. Its navy’s expansion has proceeded at a pace that’s hardly surprising given the extent of its economic growth. And naval experts agree China’s navy is no match for Japan’s, would probably struggle against India’s relatively modern and larger fleet, and certainly cannot challenge the US Navy’s regional dominance.

Some regional strategists are hoping that the existence of a common threat to their interests – the risk of an interruption in Gulf oil flows – might foster cooperation rather than competition. So far, that’s simply not been the case. If anything, the region appears as fearful of China as losing its energy supplies.

Last month, Japan and India announced they would hold regular naval maneuvers together in the Indian Ocean – augmenting the annual US-led naval maneuvers that have been held – without China – since 2007.

Naval spending is also rising in Australia, Vietnam, the Philippines and South Korea, too. While few in official circles will say so publicly, as much of this spending is directed at the threat of Chinese domination of these vital sea routes and in the mutual interest all these nations have in securing them against interruption. The plans across the region include six carriers, dozens of powerful surface warships and over 100 submarines at a cost of some $220 billion by 2030.

That’s a regional armada that should keep Somali or Indonesian pirates at bay, to be sure. But it could also turn a reason for cooperation into a casus belli.

But in 2030, when crisis in the Persian Gulf once again threatens to become a debacle of global proportions, things will be different. Yes,  the region’s unique combination of repressive regimes, energy resources, intra-Islamic rivalry and pent up popular frustrations can still explode in violence, sending shudders through global markets, sending the price of oil sky high and prompting naval task forces based half a world away to put to sea. But from an American standpoint, a 2030 spike in global oil prices – at least while tight oil holds out  - might look more like a windfall than a tragedy.

Michael Moran is Vice President, Global Risk Analysis at Control Risks, the global political, security and integrity risk consultancy.

Tim Worstal on Keystone XL: These people really are getting desperate!

I really do understand that there are people out there who don’t want the Keystone XL pipeline to be built. For a number of different reasons, some of them even possibly sensible reasons. But there are at least some of the people opposing that pipeline who seem to be becoming desperate, even to the point of advancing self-contradictory arguments to oppose the pipeline. One such is here, from Consumer Watchdog.

U.S. gasoline prices will rise, with the greatest effect on the
Midwest. The chief purpose of the pipeline is to raise the price
of Canadian tar sands by creating new export markets outside
the Midwest. Statements by Alberta, Canada officials and the
pipeline developers reflect this aim. Their explicit intention is
to export to the Gulf and abroad, which would increase the
price of crude oil and gasoline in the United States and, in
particular, the Midwest.
• Midwest drivers would be hardest hit because the region
currently imports more than half of its oil for refining from
Canada. Increases at the pump could range from 25 cents to
40 cents a gallon, depending on how regional refineries re
spond to paying $20 to $30 more per 42-gallon barrel for
Canadian crude oil.
• Canadian oil currently sent to the Midwest from Canada
would likely be diverted to Keystone XL to reduce Midwest
supply, which would put additional pressure on gasoline prices.
• Midwest refiners have been reaping exceptional profit on
cheaper Canadian oil and will resist giving up that profit to off
-set the large increase in the price of their Canadian crude oil.

That last point doesn’t accord with the first point being made. In fact, that last point makes the first point being made wrong. It’s not possible for both to be true.

Think it through for a moment. Yes, Keystone will mean that more of the Canadian tar stuff reaches the Gulf refineries. This means that less of it will get stranded at Cushing OK. So, yes, the price of crude at Cushing will rise.

This could mean that gasoline prices will rise in the Mid West. But it can’t mean both that gas prices will rise and that excessive refining margins will fall. If excessive refining margins are being made then people in the Mid West aren’t getting cheap gas to reflect the low crude price. That’s where the excessive margins are coming from, from the fact that the gas price is disconnected from the crude price. So, we might either see a fall in those refining margins or a rise in gas prices. But both won’t be happening at the same time. If Keystone removes the oversupply of crude at Cushing then refining margins will fall and there’s unlikely to be much effect on gas prices.

The aim of tar sands producers with refining interests on
the Gulf Coast–primarily multinational oil companies–is to
get the oil to their Gulf refineries, which would process addi
tional oil largely for fuel exports to hungry foreign markets.
Other oil sands investors, including two major Chinese petro
chemical companies and major European oil companies, have
an interest in exporting crude oil and/or refined products
to their markets. Such exports would drain off what the tar
sands producers consider a current oversupply, and help push
global oil prices higher.

And that’s just ludicrous. How is an increase of supply of crude to the international markets going to increase the international price of crude? Have we entered some mirror universe of entirely alternative economics or something? An increase in supply leads to a fall in price, not an increase.

If you’d like a more detailed look at the arguments being made I recommend this from Craig Pirrong, aka The Streetwise Professor.

But my basic diagnosis is that some opponents of Keystone XL are becoming so hysterical in that opposition than they’re becoming incoherent in their arguments.