Iraq turmoil feeds calls for Keystone XL and crude exports

WASHINGTON — Unrest in Iraq helps make the case that U.S. regulators should authorize crude exports and the controversial Keystone XL pipeline, the head of the oil industry’s leading trade group said Monday.

The prospect of a civil war in Iraq and the risks of declining production or a shutdown of crude flowing from the country, the second-biggest OPEC producer, are spiking international oil prices.

But U.S. oil can play a role pushing those world prices downward, stressed Jack Gerard, head of the American Petroleum Institute.

‘Downward pressure’

“We can produce our own energy here and then consume it domestically and also make it available for the world market to put downward pressure on price,” Gerard said. That “benefits all Americans at the gas pump, because the price of that gasoline is set on a global scale.”

With domestic oil production climbing, API and other industry groups have been pressuring the Obama administration to lift 39-year-old restrictions that bar most U.S. crude from being sold overseas.

But Middle East politics and the turmoil in Iraq could add new challenges to the oil industry’s campaign. If the fighting causes world crude supplies to tighten further, it could frighten lawmakers who are already skittish about opening the valves for crude to flow outside the U.S.

Gerard said the API is working to “educate” administration officials, lawmakers and other stakeholders on the issue, armed with recent studies suggesting consumers would benefit from broader crude exports.

But the energy politics around the Iraqi conflict are far from clear. Some export critics are likely to seize on the conflict as further evidence the U.S. should hold onto its precious supplies (and possibly preserve a discount on domestic oil, over its international counterpart traded in London).

Keystone XL

Gerard and a labor union leader suggested that the conflict in Iraq could add to arguments in favor of Keystone XL, the proposed pipeline that would link Alberta’s oil sands crude with the U.S. oil hub in Cushing, Okla., giving it new routes to the Gulf Coast.

Sean McGarvey, president of the building and construction trades department of the AFL-CIO, said it’s important for U.S. policymakers witnessing the tumult in Iraq to “circle the wagons and get behind what’s in our long-term interest” by supporting Keystone XL.

“Hopefully, policymakers on Capitol Hill will make some decisions on continuing current events and a future that’s murky at best across the globe and look out for North America first,” McGarvey said.

The issue could cast a shadow over the Senate Energy and Natural Resources Committee’s planned Wednesday vote on legislation that would approve the Keystone XL pipeline.

The measure was already expected to be approved by the panel, even before fighting by insurgents in Iraq intensified.

Energy security

Gerard said it was not clear if the conflict could shift more votes but it should underscore energy security arguments for the pipeline.

The unrest in that volatile part of the world . . . should remind us all of the need to make ourselves energy secure, and Keystone is key to that,” Gerard said. Approving the pipeline is “a signal we will work with our allies to the north, our trading partners on oil and natural gas….so we’ll have to rely less on global dynamics and implications from unrest, much like we see in Iraq today.”

Sen. Mary Landrieu, D-La., who authored the Keystone XL bill with Sen. John Hoeven, R-N.D., and heads the energy panel, scheduled Wednesday’s vote, which is expected to divdd the committee along mostly party lines.