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07/16/2013

Study: Keystone XL a threat to American wallets

The mad cluster of arguments for and against the Keystone XL intensfied Tuesday with the release of new research suggesting the Canadian pipeline would result in significantly higher gas prices for many U.S. consumers.

TransCanada's disputed Alberta-to-Texas project, which awaits a final answer from the Obama administration expected in September, would place diluted bitumen from the Alberta oil sands on an equal price footing, all but erasing its trading discount and elevating gas prices by 20 to 40 cents per U.S. gallon in the American midwest, according to the Consumer Watchdog study.

The report also questions the "energy security" arguments advanced by the pipeline's backers, noting much of the Alberta crude is intended for refineries on the Texas Gulf Coast, where it would easily be processed into diesel and gasoline for the world market, meeting global demand at global prices.

Neither of these findings are especially surprising. Alberta Premier Alison Redford, during her most recent visit to Washington in April, projected her government would lose as much as $6 billion in oil revenue in 2013 due to the price differential. The discount punishes Alberta's abdundance of supply and paucity of export capacity -- but it also benefits drivers in the U.S. midwest in the form of lower gas prices, compared to the rest of the country.

Yet the discount on Alberta crude varies -- and lately has shrunk to a third of what it was seven months ago, a development that for now, at least, eases the province's budget shortfall and, if prices hold, suggests Keystone XL's impact on U.S. consumers could ultimately be less than this latest study suggests.

The authors of the Consumer Watchdog report, however, argue that with oil producers aiming to maximize profits by attaining the highest possible price for Alberta crude, Americans should be braced to pay more, not less, if the pipeline is approved and comes online.

"U.S. consumers should be wary of the Keystone XL pipeline -- not just for substantial environmental and safety reasons, but because it threatens their wallets. Given the fleeting benefits of construction jobs, the unprovability of long-term benefits and the negative effect of higher gasoline costs on consumers, Keystone XL is no economic boon to the United States," the report concludes.

Mitch Potter is the Toronto Star's Washington Bureau Chief, his third foreign posting after previous assignments to London and Jerusalem. Potter led the Toronto Star’s coverage of the wars in Iraq and Afghanistan, where he won a 2006 National Newspaper Award for his reportage. His dispatches include datelines from 33 countries since 2000. Follow him on Twitter: @MPwrites

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