Economic Outlook: The key to Keystone
2/18/2013 2:29:15 PM
The answer to the U.S. economic morass lies under our feet, literally, some would say.
The country was built on hydropower, which was so cheap once that all you had to do was build a mill on a river and the power source would come to you. Water was power and it just kept coming.
Oil is a different matter. You have to find it first, then drill, then transport it, then burn it. Before a barrel of oil turns a turbine at a power plant in Ohio it has to move from its starting point, which may be somewhere underground half way around the world or under a mile of salt water. That's a lot of environmental impact before anyone even lights a match.
U.S. President Barack Obama is facing what The New York Times called a "knotty decision," on whether to approve of a 2,000-mile pipeline from central, western Canada to Nebraska and from there to Gulf Coast refineries.
The solution, if it based on reality, should be to allow the pipeline -- but only for the right price.
That is based on the insurmountable realities that if Obama doesn't approve the project, then a future president will. That is only, of course, if Canada is willing to sit on a meal ticket for however long it takes for its neighbor to the south to make up its mind.
The choice isn't whether to use Canadian oil. Most people who think oil think of Texas or Saudi Arabia but the largest foreign oil supplier for the Unites States is -- surprise, surprise -- Canada. The United States imports 2.4 million barrels of Canadian oil per day.
So, the question isn't whether to approve the Keystone XL pipeline, the question is when and the question, furthermore, is what environmentally friendly gestures can be had in exchange for approving the deal.
Environmentalists, of course, prefer expensive oil on the theory that people will use less of it.
It isn't too much of a leap to see that the reason Obama should approve the Keystone XL pipeline is precisely because of his track record on the environment. What environmentalists should oppose isn't less oil but oil that arrives without an environmental payback.
Although a staunch advocate for reduced restrictions on the oil industry for economic reasons -- to reduce the deficit with oil exports for one -- economist Peter Morici at the University of Maryland frequently says the United States should be the one out there drilling for oil, because U.S. companies are more environmentally responsible than international rivals.
Extending some of that trust to the neighbors to the north is part of the equation concerning the decision on the Keystone XL project. This isn't about Canadian oil; it's about Canadian oil versus oil from Venezuela.
If the Keystone XL pipeline is inevitable, this should be a time to negotiate a return for environmentalists they can accept. By extension, if U.S. oil companies should be the ones out there working the fields due to their inherent level of responsibility, then Obama, for the same reason, should be the president negotiating the terms of the Keystone XL pipeline -- as opposed to some future president with an unknown record on the environment.
Canadian oil isn't a liability. It's a serious bargaining chip.
In international markets Monday, the Nikkei 225 index in Japan rose 2.09 percent, while the Shanghai composite index in China lost 0.45 percent. The Hang Seng index in Hong Kong fell 0.27 percent, while the Sensex in India rose 0.17 percent.
The S&P/ASX 200 in Australia added 0.59 percent.
In midday trading in Europe, the FTSE 100 index in Britain lost 0.2 percent, while the DAX 30 in Germany gained the same, 0.2 percent. The CAC 40 in France was off 0.03 percent, while the Stoxx Europe 600 shed 0.28 percent.