Advice: Biden’s decision to cancel Keystone is one the US will eventually regret

Advice: Biden’s decision to cancel Keystone is one the US will eventually regret

by

First, Biden’s reversal of the cross-border pipeline permits begins an onslaught on the petroleum industry’s value chain, with unprecedented breadth, assertiveness and tangible investment impact. Although this reversal will not cause much damage to the oil industry, and is currently not absolutely necessary for US oil, this decision has long-term consequences.

The next time oil prices rise (and trust it, they will), investors will be interested in pipeline projects again and whoever is in the White House may regret the cancellation of Keystone XL as the United States relies more on less stable trading partners for oil. will have to rely on.

The aggressive and broad onslaught of the regulations by the cancellation of Biden’s Keystone XL will prove that he is not kidding when it comes to climate policy. The president is recruiting an extensive, experienced and motivated team of environmental policy officers who are capable of exercising the executive’s regulatory power. The well-planned campaign includes conventional steps such as federal leasing and banning, including the temporary moratorium placed on oil and gas leasing in the Arctic, stricter methane regulations and more expensive and time-consuming environmental reviews. Since almost everyone needs federal permits, pipelines in particular are in the crosshairs, and the Dakota Access Pipeline is the next potential target if the courts do not even close it.
The Biden government will also open other fronts against the petroleum sector. It will use environmental justice policies to give underprivileged communities or indigenous groups located near energy projects a virtual veto over projects near their states, such as the opposition of the Standing Rock Sioux to the controversial Dakota Access Pipeline. It will mobilize comprehensive financial regulatory authorities to increase the capital costs of the petroleum industry and engage in trade negotiations for the climate fight.

In short, Keystone XL is the beginning of something big. Research by my firm Rapidan Energy Group has found that the upcoming Biden administration regulations will reduce U.S. oil production by 1 million barrels per day by 2023 compared to a second Trump term.

Keystone XL is widely considered uneconomical because Canada currently has more pipeline capacity than it needs, and because oil demand will soon peak, expensive resources from places like Canada will not be needed. But complacency will only last until the next inevitable surge in oil prices.

Contrary to popular belief, falling oil demand will not keep oil prices low forever. And even if demand soon peaks, supply outside the Middle East is likely to fall faster than demand slows. This is likely to cause the United States to become more dependent on cheaper producers in the Middle East. As oil production rises in the Middle East, the buffer held by producers will drop an extra capacity. The lower their free capacity, the higher oil prices rise when geopolitical disruptions occur.

Oil’s next price boom will confuse industry and political priorities. The price and supply of oil will go up. After all, oil is the lifeblood of modern civilization. While President Jimmy Carter and President George HW Bush have learned the hard way, rising oil prices are contributing to recessions and lost elections. Around the world, sharply rising oil prices have contributed to massive social unrest, as happened in the UK in 2012.
And our dependence on oil is not going anywhere fast, no matter how fast electric vehicles arrive. The International Energy Agency’s scenario for sustainable development presupposes a very aggressive climate policy. However, it plans to increase the share of oil in total energy production over the next 20 years by only eight percentage points, from 31% to 23% by 2040. Therefore, future price pushes, as in the past, will frustrate consumers, frighten elected officials and cause economic shift growth and import dependence at the top of the priority list.
As oil prices flourish, interest in Canada’s oil resources, the third largest in the world, will rise. But they are stuck, far from refining centers and expensive to transport. Pipelines are cheaper and safer than rail, so projects like Keystone XL are essential.
ExxonMobil reports its first annual loss since its merger

Alberta’s heavy and sulfurous crude oil is valued by complex refineries in the U.S. Gulf Coast and the Indo-Pacific. Following the cancellation of Keystone XL, Canada will send more heavy crude oil to Asia, where it will receive a higher price due to being far away from heavy crude suppliers, and less to US refineries, which will buy more from Mexico, Venezuela and the Middle East. East. It does not matter much economically, but it is a major concern for national security, as Canada is a much more stable and friendly partner than others.

Of course, energy stores know that oil is widely traded and priced worldwide, so no country is protected from price fluctuations. But history has repeatedly shown that Washington goes into a crisis mode and the drink quickly goes out the window when pump prices rise. So if the cost of oil returns to $ 100 amid the growing dependence on the Arabian Gulf, Biden’s day one cancellation of a significant pipeline from our largest source of energy imports would be seen as a much more controversial move than today.

.Source