Quote:
She co-wrote a recent IHS CERA report that argued the new Keystone pipeline could help cut gasoline prices in the United States, simply because more supply should lower oil prices. Canada's tar sands, as well, produce heavy crude that requires more sophisticated refineries, which makes it a good fit for recently upgraded facilities on the Gulf Coast. "That oil will be consumed in the United States—or at least enter the refining market there," she says.
Exports from Gulf Coast refineries are up in recent years as the plants take advantage of supply disruptions in Latin America and Europe. But they still account for only about 10 percent of the region's refined products, Forrester says, adding that Canadian oil won't change that dynamic.
But Verleger points out that only a few companies control the Gulf Coast refining capacity that might be available to the Canadian oil. The refiners are encouraging the pipeline, but the point is to bring more supply to the market to keep Gulf Coast crude prices low—significantly lower, in fact, than the global price of oil. It would give the refiners an unprecedented ability to buy low and sell high. The Keystone XL pipeline, Verleger argues, could transform the U.S. Gulf Coast into the most profitable refining center in the world.
To avoid being pushed out of the U.S. market, Verleger suggests that the Canadian producers should buy their own Gulf Coast refineries or otherwise lock up capacity for their crude—as foreign rivals Saudi Arabia, Venezuela, and Mexico all have done.
The pipelines are a good thing all the way around. They get our crude to the refineries and to our US market as well as export markets. It's all good.