Tonight on Fox Business' Power And Money, David Asman hosted Joe Petrowski, President and CEO of Gulf Oil LP, to claim that because President Obama has decided not to immediately build the Keystone XL (KXL) pipeline and pursue additional domestic oil production, gas prices will increase as early as "the summer." Petrowski specifically asserted that building the pipeline could reduce gas prices in the long term by as much as "20 to 30 cents a gallon."
However, according to researchers at the Cornell University Global Labor Institute, TransCanada, the proposed manufacturers of the pipeline, admitted that "KXL will increase the price of heavy crude oil in the Midwest by almost $2 to $4 billion annually." The Cornell study explains that this will happen as a result of "diverting major volumes of Tar Sands oil now supplying the Midwest refineries, so it can be sold at higher prices to the Gulf Coast and export markets."
Fox expects us to take Petrowski at his word when he claims that building KXL could result in gas prices dropping "20 to 30 cents a gallon"; indeed, Asman responds to his claim by saying that the Gulf executive is "on the retail side of the gas business, so you know" how gas prices come about.
But the Cornell University study estimates nearly the exact opposite of Petrowski's claim, estimating that building the KXL pipeline could increase domestic gas and diesel fuel prices in some states by between "10 to 20 cents more per gallon" and, to rub salt on the wound, possibly "cancel out some or all of the jobs created by KXL" after only one year of increased fuel prices. From the study:
HIGHER FUEL PRICES IN 15 STATES
According to TransCanada, KXL will increase the price of heavy crude oil in the Midwest by almost $2 to $4 billion annually, and escalating for several years. It will do this by diverting major volumes of Tar Sands oil now supplying the Midwest refineries, so it can be sold at higher prices to the Gulf Coast and export markets. As a result, consumers in the Midwest could be paying 10 to 20 cents more per gallon for gasoline and diesel fuel, adding up to $5 billion to the annual US fuel bill. Further, the KXL pipeline will do nothing to insulate the US from oil price volatility.
Even one year of fuel price increases as a result of KXL could cancel out some or all of the jobs created by KXL, based on the (more accurate) $3 to 4 billion budget for KXL (the remaining cost to build within the Us). Higher fuel prices due to KXL would have broad adverse impacts. Gasoline is a significant cost for most Americans, and especially for those with lower incomes and/or residing in rural areas. Moreover, refined oil products (notably gasoline and diesel) are very widely used throughout the economy (especially in agriculture and commercial transportation). So higher fuel prices due to KXL would ripple through the economy and impact a very broad range of people and businesses.