Keystone XL: Beholden to the Highest Bidder

Blocking the Keystone XL pipeline probably won’t stop the development of Canadian tar sands. Although climate change and the need to protect habitat make leaving tar sands untouched a laudable goal, unrelenting demand for petroleum in Asia means that if Canada does not send its oil southward to the United States, it is likely to send it to Asia instead. Despite this reality, the rally against the pipeline could still represent a pivotal point for America’s modern environmental movement. If nothing else, the Keystone XL showcases America’s complete lack of comprehensive energy policy. It represents a steel umbilical cord to the petroleum past and does nothing to address the future economic or environmental realities of our country. Within the coming two months, President Barack Obama will make a decision about the pipeline’s future. Regardless of his decision, the battle leading up to it has made one thing clear: the United States needs a comprehensive energy policy, and needs it now.

Perpetuating America’s Addiction

How did we reach a point where building a 1,661 mile pipeline to transport the world’s dirtiest petroleum across six (or more) US states could ever make sense? One argument is that the megaproject would enhance national security. Another is that it will ensure lower domestic prices per gallon of gasoline and diesel. Both of these arguments, however, are belied by the fact that America’s national and economic security can only lie in controlling its fuel demand, not chasing supply, whether this means finding hydrocarbons in Canada, the Middle East, Africa, or offshore US coastlines. Moreover, how do any of these pro-pipeline arguments address the nation’s long-term environmental needs? Why should America’s energy policy towards oil exist independent of recent trends in renewables, energy efficiency, and natural gas? The answer: America is addicted to oil.

From an economic perspective, our oil addiction is problematic because oil is sold only to the highest bidder. From a policy perspective, our addiction is irrational and unsustainable. America needs to seriously begin curtailing its oil use and stop subsidizing cheap oil with poorly formulated energy policy. The quantity of oil resources consumed by Americans is staggering. With less than five percent of the world’s population, Americans consume nearly a quarter of global petroleum production – approximately 20 million barrels of oil per day. Americans expatriate $13 million per hour for foreign oil. For all of this consumption, America pays nearly $5 billion per year in oil subsidies for a resource that is not a reasonable part of our energy future. Even if the International Energy Agency anticipates that US oil demand will drop over the next 20 years, energy scenario projections still show that the US will continue forward as one of the world’s largest per capita petroleum consumers. This consumption will continue to rely on imports, and prices will continue to be set in the context of global markets.

The Canadian state of Alberta sits on 170 billion barrels of unconventional petroleum reserves, which, over the long term, will only contribute to keeping America strung-out on oil. America is entirely submissive to the international market forces governing petroleum. Rather than shielding America from the international petroleum circus, the Keystone XL would serve as a shackle to an inherently unstable system over which America has limited control. Even if new North American supplies increase global availability of oil, prices remain largely beholden by a club of producer countries like OPEC. Oil is a fungible commodity and is inherently economically unstable because petroluem exists as a financially traded asset, not a simple commodity governed by textbook principles of supply and demand. Simply increasing the flow of oil into America will not protect the nation from price shocks that originate in the Middle East or beyond.

Energy Policy as a Driver for Environmental Benefits and National Security

Curing America’s oil addiction requires formulating an energy policy that begins to obviate oil consumption. Today’s perception of the energy landscape is one where oil is too insecure, natural gas is too expensive, nuclear is too dangerous, renewables are too insufficient, and coal is too dirty. Achieving long-term environmental benefits and realizing true energy security will require policy that is designed to decrease oil use until the nation is totally “clean,” not a policy that merely perpetuates our  addiction by buying cheaper oil from a friendlier dealer.

Although it is phenomenally difficult to envision a life without oil, the reasons for planning beyond oil are numerous. Perhaps the most obvious issue with oil, let alone dirty tar sand-derived crude, is related to greenhouse gas (GHG) emission contributions. Wells to wheel analysis shows that the GHG impacts of driving are approximately 15% higher when the actual production of oil is taken into account. Then there is the concern of environmental degradation that oil pipelines physically represent. Since 1991, there have been over 2 million barrels of oil split on the US mainland, triggering over $5 billion dollars of remediation. These figures capture the often irreparable ecological damage these spills cause and are exclusive of the risks associated with off-shore drilling, as exhibited by the Deepwater Horizon tragedy.

From an energy security perspective, the Keystone XL is much less attractive than curbing gasoline consumption via existing technologies, or better yet, creating the “Post-Oil City,” a project championed in Germany, which intends to combine urban design concepts with electric public and private transportation systems to eliminate petroleum consumption in cities. Though often misconstrued by the media, post-oil viewpoints are hardly those of “hippie” or politically soft environmentalists. The Center for Naval Analysis, which boasts 13 retired senior US military officials, released a report concluding that while North American production of oil is somewhat advantageous for America’s petroleum security, US oil consumption is the “significant security threat.” Furthermore the paper called for immediate steps toward a 30% reduction in US demand. In this vein, the US military has taken the lead in reducing our crude consumption. How can we ask our soldiers abroad to use less diesel fuel while simultaneously taking virtually no bold steps to reduce domestic consumption?

Oil is a fungible commodity, meaning that units produced in different parts of the world are interchangeable. Particularly given OPEC’s ability to control global supply, this fact undermines the argument that the Keystone XL pipeline would lower U.S. gas prices or improve U.S. security. OPEC and other special interests across the globe ultimately control how much oil martini we get for our buck. (Illustration by Alisa May)

There is No Easy Answer, but Oil is Not an Option

Although oil is predominantly used domestically as a transport fuel, mitigating its importance in US energy policy will require clearing up the huge misconception about renewable energy and oil use, and realizing the collective importance of energy efficiency, hybrid vehicles, electric vehicles, and most importantly, the natural gas needed to create electricity.

However convoluted in the popular media, oil and renewable energy are largely two separate issues. Only 5% of the nation’s electricity is produced by using oil as a fuel source. Replacing oil with electricity is a tall order. Wind and solar power do not power vehicles and because of their intermittency, their role in the overall energy system, while important, remains limited. Ramping-up renewable energy use has virtually no impact on domestic oil consumption unless policy embeds renewables into broader, sweeping elements of energy planning. The following is an explanation of the opportunities and constraints post-oil energy planning faces:

  • Residential Energy Efficiency – Compact fluorescent light bulbs, home insulation, and other measures are a vital “first-response” for controlling energy demand, especially in residential buildings reliant on fuel oil as an energy source. The most immediately deployable energy asset outside direct efficiency is low-grade steam, which is incredibly effective at reducing fossil fuel consumption and can lower CO2 emissions in the United States more than solar and wind power combined. Additionally, by implementing advanced industrial design, especially combined heat & power (CHP), facilities can achieve efficiencies great than 50%, a far cry from America’s atypical power plant efficiency of 35%. Currently CHP facilities comprise only 9% of the current US electric generating capacity. U.S. EPA and Department of Energy reports suggest energy recycling could provide almost 40% of our electric needs while saving over $100 billion in fuel costs.
  • Electric Vehicles – Arguing strictly against the environmental impacts of pipelines would essentially kill the mass use of electric vehicles in the US. Most of the nation’s non-nuclear power plants are not built to run 24 hours per day. Because most electric vehicles would be plugged in at night, and because the nuclear renaissance unfortunately appears dead post-Fukushima, modern power plants will be needed to stabilize the electricity system. Coal is not the energy source of the future and renewables are simply insufficient, regardless of recent innovation. This leaves natural gas, which although not perfect, is the cleanest and most abundant domestic fossil fuel source. For this reason, and despite the issues surrounding hydraulic fracturing, it is far more likely than not that natural gas extraction will continue to increase. This means that more natural gas pipelines will be needed throughout the country in order to feed both natural gas-fired power plants and resource end users. If environmentalists are set on opposing pipelines, then they are de facto opposing the proliferation of electric vehicles.
  • Hybrid Vehicles/Plug-in Hybrid Vehicles – Even if factories started producing only hybrids this very minute, it would take about 20 years for all of the current vehicles to run their course and be replaced by hybrids. Even then, one-third of US transportation fuel is consumed in heavy trucks. Here too, natural gas might play a role, as heavy trucks can run on liquefied or compressed natural gas or like-gas derivatives. This not only reduces reliance on petroleum, but would greatly improve air quality in urban areas.

Conclusion: Overdosing on Oil

Another century of underpriced oil will only sap America’s innovative spirit. Assuredly, removing oil subsidies and including even a modicum of oil’s security and environmental externalities in its price would stimulate mass deployment of alternatives. Short of this, though, it is the responsibility of the environmental movement to proactively move the nation towards a smarter, cleaner energy future. Comprehensive energy policy is an urgent priority. Keystone XL represents a direct calling to this responsibility. Failing to respond to the challenge with a practical energy perspective will only further distort America’s energy free market and inhibit environmental progress. All for the sake of oil.

The time is now to face our addiction.


Author Biographies:

Brian Marrs is a graduate student at the Yale School of Forestry and Environmental Studies. He worked as an energy economics specialist before serving as a Robert Bosch Foundation Fellow at the German Energy Agency and Vattenfall Europe, the fourth-largest power provider in the European Union. Brian is also a Fellow of the Swedish Institute for Nordic Energy Studies, and a McCloy Fellow in Environmental Policy with the American Council on Germany. He was a 2011 finalist in the Shell Energy for Tomorrow competition and is a contributing author to the textbook Sustainability from the Transatlantic Perspective.

Joseph Edgar is a joint degree student at the Yale School of Forestry and Environmental Studies and Pace Law School. Joseph serves as an Energy Consultant for the Pataki-Cahill Group in New York City and is also the Program Director for the Brazil-American Institute for Law and Environment (BAILE). He holds a B.A. from Northeastern University.

Artist Biography:

Alisa May is a Los Angeles artist who earned a Bachelor’s Degree in Architecture prior to becoming a graduate student at the Yale School of Forestry and Environmental Studies. She draws upon the diverse disciplines of art, architecture, and sustainability to design building projects in Haiti, Rwanda, and the US and also to create artwork related to humanitarian and ecological issues.




  1. Really interesting point about the electric car constraint.

    I’m interested to hear what you think of another, perhaps, unintended consequence of banning Keystone and other oil development projects: the resulting increase in oil prices that you strongly advocate for would crush the world economy. Do research into the work around the 08 oil shock and how it affected te recession. If the US were to fall into a deeper economic funk, there 1) might not be enough money to find green investments and 2) might not be a sympathetic Democratic president in office anymore.

    Finally, I advise you to look into the shale oil market. Natural gas isn’t the main driver of fracking anymore, it’s oil. This shift has occurred in the last 6-8 mos, and very quickly.

  2. Brian and Joe says:

    Dear YC’11,

    Taking a position on Keystone does not advocate higher prices; if you read our article carefully, we say that if the oil does not move to the US, it will likely go to Asia. Even then, the total increase in global petroleum output from building either Keystone or a trans-British Columbia pipeline would be small towards influencing global prices. So, practically speaking, production from Iraq, Iran, Libya, Venezuela, and eventually Brazil will have much more influence on global oil price stability, assuming constant demand.

    Had you actually been trading oil and gas in 2008, you would know that the levels of volatility went far beyond basic supply and demand fundamentals. Your point about the effects of high oil prices on the global economy is valid, but you really should do research on the irritants versus causes of the 2008 subprime crisis. We bailed out the banks and mortgage lenders, not Exxon, for a reason.

    Our advice to you is to avoid the herd mentality so common in the energy industry. Talking points about crushing the global economy are easy use in passing, but when the deeper energy economics of oil demand in developing countries are considered, your point is somewhat weakened. Besides, innovation and realization of multiple resources is a good thing, don’t you think?

    Lastly, “fracking,” as you use the term, is ambiguous. The process of horizontal drilling and subsequent high pressure application of low viscosity gels is similar but not representative enough to call a “driver” of fracking in shale oil. You are right – shale oil is back on the radar screen – but it’s not the “driver” of fracking, and until the economics improve, which they very well could, it’s still a bit too early to make conclusions.

  3. Vicente Godfrey says:

    “Although climate change and the need to protect habitat make leaving tar sands untouched a laudable goal, unrelenting demand for petroleum in Asia means that if Canada does not send its oil southward to the United States, it is likely to send it eastward to Asia instead.”

    Its sometimes difficult to shake off the Eurocentrism we are too comfortable with, so I’ll be the first one to give you both a pass for suggesting that Canada would ship its oil by taking the much longer route east rather than west (sorry that one was an easy one to go after).

    “Even if new North American supplies increase global availability of oil, prices remain largely beholden by a club of producer countries like OPEC. Oil is a fungible commodity and is inherently economically unstable because petroluem exists as a financially traded asset, not a simple commodity governed by textbook principles of supply and demand. ”

    It would be more concise to say that prices remain beholden to OPEC because they control most of the SUPPLY and that global political and environmental events can affect delivery of supplies, which also affects prices. Aside from that, it would do the reader more justice if you broke down all the factors that affect the price of crude and make a visual or descriptive case to persuasively state that the USA’s lack of control over all of those factors demands a domestic policy that leads us to less energy dependance on crude oil. You can’t paint the picture with only two brush strokes.

    Also, why is infrastructure development left out of this conversation? Have the two of you looked at the numbers to see how many cars the U.S. can take off the roads (and therefore reduce oil consumption) if, say, the top 20 cities in America had modern, and effective mass transit systems? You lightly touch upon this subject on the Germany example, but this deserved more discussion and analysis. Or how about federal policies that encourage MORE urbanization and curtail suburbanization/exurbanization for the sake of efficiency? If the point of your article is to ultimately discuss ways of reducing oil consumption, shouldn’t non tecnological policies/practices be thoroughly vetted? Or at the very least, place a sentence somewhere stating that focusing on the technological solutions to our oil dependance deserve the majority of America’s focus and effort and maybe state why.

    I am interested in your replies. In spite of what I wrote above, I do think the both of you do head in the right direction in terms of the subject of comprehensive energy policy, but this article should have been longer and clearer for the casual Sage reader. It just feels incomplete to me.

    Looking at the bigger picture, we environmentalists need to employ better marketing to translate policy/topic discussions such as these into a language or picture/s that the American public can easily comprehend and react to in a positive way. Keystone XL was a victory for us because there is nothing hippie or liberal about saving the grazing areas of cattle ranchers and the water that the cattle drink. Big Oil couldn’t get away with painting us as boogie men/women this time around. How do we fight such labeling in the communication medium?

  4. The Editors says:


    Thanks for your comment. We’ve removed the offending “eastward.” The authors used the term because Asia is known as The East–but from Alberta the shortest way to Asia is, of course, westward. Crazy round planet.

    Thanks again.

    -The Editors

  5. Pingback: Synchronicity studies: celebrating 2/4/12! | Teresa Young's Beautiful Life Blog

  6. Pingback: Synchronicity studies: celebrating 2/4/12! | Teresa Young's Beautiful Life Blog

  7. Brian and Joe says:

    Dear Vicente,

    Thanks for your response. You raise a number of interesting points. Before we dig in, however, there are a few things we want to clear up.

    Regarding your first point about sending Canadian oil East through Europe in order to get it into Asian markets, our use of the word “East” was a geographic typo; clearly any Canadian route to Asia would go to the West. Thanks for pointing out the error so the proper direction could be inserted. Still, given the economics (and logistics) of oil trading, we are not entirely clear how our discussion could ever be confused as Eurocentric.

    As to your point about the shortness of the article, we completely agree with you. When publishing there are often space considerations that dictate what can be written. Here, because of such constraints we opted for a 30,000-foot view discussion. We believed it was more important to get the vital energy policy issues out there instead of bogging the article down in minutia of supply-side oil economics. As we are sure you will agree, listing all of the factors that affect the price of crude is a tremendous task that would extend well beyond energy economics and policy. Our motivation for writing the article was to 1) advocate for a deeper breadth of energy knowledge throughout the environmental movement and 2) spark a conversation surrounding the nation’s desperate need to move towards energy innovation, not energy stagnation.

    That said, we agree with you that infrastructure development is a vital part of a revised, strategic American energy policy. We like your points about urban mass-transit efficiencies and using technology to force down oil consumption. We are ardent supporters of public transit, but again, our intent here was not to recommend the specific prescriptions to US oil addiction, just diagnose the disease and recommend a general therapy program – namely, a 30% petroleum demand reduction – a goal endorsed by our country’s leadership in the armed forces.

    Regarding you claims as to why Keystone XL victory was achieved, we wish we could share your optimism that environmental ideology led way. Without doubt, grassroots opposition against the project was well organized, but given the Obama administration’s consistent punting on environmental policy decisions, we are holding our breadth until after this year’s election before we can exhale to any victory.

    What we challenge you to do, and all other environmentalists for that matter, is to think about what you would say to the CEOs of Imperial Oil, TransCanada, and other Canadian tar sands-dependent companies in order to explain to them why they lack a business case. Realistically, environmentalists must evaluate the trade-offs inherent to the energy industry and begin incorporating economic concepts into our arguments. After all, what would you say, for example, to convince a capital markets professional not to pump pension fund money into the tar sands for the sake of cleaner energy investments with lower rates of return? What are the realities for people that are not environmentalists?

  8. Vicente Godfrey says:

    Brian and Joe:

    Thanks for the reply. I appreciate your consideration to my comments and for clearing up, for me at least, the intent behind your article.

    Your last paragraph in your response is excellent. These are great questions that begs adding an environmental economics section to this magazine. People react much quicker if you talk about how their wallets are affected due to environmental policy decisions (or lack thereof). Environmental economics is long overdue to go into the mainstream. How we can put a plan into place to take enviro econ from academia to the mainstream sounds like a good research (read thesis) topic ;P But first, those economic concepts you both speak of do need to be given more vigorous life in academia.

    Now that I think about it, I intend to take your challenge. I’m curious to hear what these CEO’s DO really have to say. I’ll take a look at my pension fund and mutual funds to see if such money is going to tar sands. I’d like to see how persuaded they become after I write to them. I’ll keep you two posted. (It’ll be a while so dont grab your popcorn just yet).

    • Hi David, Thanks for dproping by.Petroleum in the form of gasoline is what powers the hydro generators and the turbines in the electrical plants. Gasoline is also needed to mine and ship the the coal and extract the natural gas.And while we have a fair amont of natural gas here,I agree with you that importing it is tons more difficult and dangerous than importing oil.Also, gasification of coal and the refining of shale oil are much more environmentally friendly processes than they once were, and like nuclear power suffer a bad rap.But I actually think there’s more to the prejudice against coal plants, building refineries and using nuclear power than meets the eye.I think the hidden factor is money from the Arabs and the oil companies that probably ends up in the pockets of a great many congressmen known as `envirommentalists’.All Best,ff

Leave a Reply to Brian and Joe Cancel

Your email address will not be published. Required fields are marked *