The Keystone XL pipeline might be a good thing for job creation and overall crude oil supply, but the same positive effect on gasoline prices may not be coming.
The 1,700-mile pipeline has been at the center of the debate between Republicans and Democrats over job creation, but according to a NPR StateImpact story, the pipeline might have a negative impact on gasoline prices in some areas including Texas.
The reason is based on the premise that access to crude oil is uneven.
In the current crude oil pipeline system, the Midwest has more access to crude oil from North Dakota, Montana and Canada, and a glut of oil is sitting idle in Cushing, Okla., unable to reach refineries in the Gulf Coast.
As a result, the crude oil is selling cheaper because it can’t get the refineries easily.
The Keystone XL pipeline and another project by Enbridge would alleviate that bottleneck by bringing the glut of oil to refineries in the Gulf Coast, and analysts say that could lead to the end of discounted crude.
“That’s the concern here,” Patrick DeHaan, an analyst for GasBuddy.com, told NPR’s StateImpact Texas. “Is that by removing the glut in supply that you will cause oil prices to go up which will likely impact motorists.”
DeHaan believes the two pipeline projects could cause the price of West Texas Intermediate crude to rise, leaving consumers with higher prices. Texans might be faced with higher prices if WTI prices rises, DeHaan said.
However, TransCanada has disputed the claim that crude oil prices could rise due to the pipeline.
A Department of Energy memo found a paper by Phillip K. Verleger showed the Keystone XL pipeline would reduce the discount, but the pipeline wouldn’t increase gasoline prices for Midwest consumers.
But according to StateImpact, oil companies concede that the pipeline project could raise gasoline prices in some areas of the U.S.
“I suppose it’s possible that places like the Rocky Mountains could see a slight increase in prices,” Bill Day, a spokesman for Valero, told StateImpact. “The benefit to the rest of the country is going to outweigh that though.”
Analysts have warned in the past that the Rocky Mountains and the Midwest could see prices increase because of the Keystone XL pipeline.