Keystone Fallout: As Promised, Canada Building Pipelines to Sell Oil to China

In April, Canadian Prime Minister Stephen Harper revealed disheartening consequences for America's energy policy at a think-tank event in Washington. Asked about President Obama's decision to put off a decision on the construction of the cross-border Keystone XL pipeline, Harper explained that it would permanently alter Canadian energy policy.

What it really has highlighted for Canada is that our issue when it comes to energy and energy security is not North American self-sufficiency. Our energy [issue] is the necessity of diversifying our energy export markets. We can not be, as a country, in a situation where really our one, and in many cases almost only, energy partner could say no to our energy products. We just cannot be in that kind of position.

Harper went on to say that the alternative to a pipeline south into the Gulf region of the United States was a pipeline west to reach the markets of Asia. Now fast forward a couple months, and the New York Times is reporting this:

While Joe Oliver, Canada’s minister of natural resources, said in an interview that the United States would remain Canada’s “most important customer,” billions of barrels of oil that would have been refined and used in the United States are now poised to head elsewhere. Expansion of Canada’s fast-growing oil-sands industry will be restricted by the lack of pipeline capacity before the decade’s end, he said, which “adds to the urgency of building them so that the resources will not be stranded.”

Three new pipeline network proposals — two that call for heading west and the other east — have been put forward.

In other words, Stephen Harper was not making an idle threat or a political statement. Canada is moving full speed ahead with plans to sell tar-sands oil to other consumers, particularly China.

The benefits to Canada of exporting to Asia are obvious. Canada currently earns less per barrel for its oil than the market price because it is a captive supplier to the U.S. Opening the market to Asia means more money for Canada. But there is no conceivable benefit to the United States in having oil from our closest, most trusted neighbor sold to China. The United States loses jobs and is forced to continuing buy its oil from nations like Venezuela and Saudi Arabia instead.

The scale of this blunder, which the President made ostensibly on environmental grounds, is compounded by the fact that there is no putting the genie back in the bottle. Once a new pipeline is built, Canada has no reason to return to selling its oil products solely to the U.S. at a reduced price. The decision not to approve Keystone XL makes Solyndra look like a stroke of genius.



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