Opinion: Biden’s decision to cancel Keystone is one that the US will eventually regret

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First, Biden’s investment in cross-border permits for the pipeline launches a regulatory attack on the oil industry’s value chain, with unprecedented breadth, assertiveness, and tangible impacts on investment. While this investment will not do much harm to the oil industry, and right now is not absolutely essential to American oil, this decision has long-term consequences.

When the price of oil rises (and trust me, they will), investors will resume interest in pipeline projects and anyone in the White House may regret the cancellation of Keystone XL because the United States will have to trust more in less stable trading partners for oil.

The aggressive and widespread regulatory aggression initiated by the cancellation of Biden’s Keystone XL will prove to be no joke when it comes to climate policy. The President recruits a broad, experienced, and motivated team of skilled environmental policy officials in exercising the regulatory power of the executive branch. The well-planned campaign will feature conventional steps, such as federal leasing and a ban on permits, including a temporary moratorium on leasing oil and gas in the Arctic, stricter methane regulations, and more costly and time-consuming environmental reviews. Since almost all require federal permits, the pipes are especially in the spotlight, with the Dakota Access Pipeline being the next potential target if the courts do not close it first.
The Biden administration will also open other new fronts against the oil sector. It will deploy environmental justice policies to give disadvantaged communities or indigenous groups located near energy projects a virtual veto power over projects close to their lands, such as Standing Rock Sioux’s opposition to the controversial Dakota Access Pipeline. It will mobilize financial regulators to raise the capital costs of the oil industry and achieve trade negotiations with the climate fight.

In short, Keystone XL is the start of something big. Research by my company Rapidan Energy Group found that the Biden administration’s upcoming regulations will reduce U.S. oil production by a million barrels a day in 2023 compared to a second Trump trajectory.

Keystone XL is widely seen as uneconomical because Canada currently has more pipeline capacity than it needs, and with oil demand ready to arrive soon, expensive resources from places like Canada will not be needed. But complacency will only last until the next inevitable cycle of oil price boom.

Contrary to popular belief, declining oil demand will not keep oil prices low forever. And even if demand starts to peak, supply outside the Middle East is likely to fall faster as demand slows. This is likely to make the United States more dependent on lower-cost Middle Eastern producers. As oil production in the Middle East increases, the cushioning memory of these producers (called spare capacity) will go down. The lower its reserve capacity, the higher the oil prices rise when geopolitical disruptions occur.

The upcoming oil price boom will bring down political and industry priorities. The price and security of oil supply will reach the top. Oil is, after all, the vital axis of modern civilization. When President Jimmy Carter and President George HW Bush learned the hard way, rising oil prices contribute to the recession and the loss of elections. Worldwide, the sharp rise in oil prices has contributed to massive social unrest, as happened in the UK in 2012.
And our dependence on oil is not going anywhere fast, no matter how fast electric vehicles arrive. The International Energy Agency’s sustainable development scenario assumes very aggressive climate policies. However, it predicts that the proportion of oil in total energy production will fall by only eight percentage points over the next 20 years, from 31% to 23% by 2040. Therefore, future price booms, such as the previous ones, they will frustrate consumers, land elected officials, and change their economy dependent on growth and imports at the top of the priority list.
As oil prices rise, so will interest in Canada’s oil resources, the world’s third-largest. But they are out to sea, away from refining centers and are expensive to transport. Pipelines are cheaper and safer than railroads, so projects like Keystone XL are essential.
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Alberta’s heavy, sulfide-grade crude is appreciated by complex refiners on the U.S. Gulf Coast and the Indian-Pacific. Following the cancellation of Keystone XL, Canada will ship more heavy crude to Asia, where it will get a higher price, as a result of being away from heavy crude suppliers, and less to American refiners, who will buy more in Mexico, Venezuela and the Middle East. This doesn’t matter much financially, but it is a major concern for national security, as Canada is a much more stable and friendly partner than others.

Of course, energy nuisances know that oil is traded on a large scale and has a global price, so no country is protected from price volatility. But history repeatedly shows that Washington is entering crisis mode and that Winkery is quickly stepping out the window as bomb prices rise. So when the cost of oil returns to $ 100 amid rising dependence on the Arabian Gulf, on the first day of Biden, the cancellation of a significant pipeline from our largest energy import source it will be seen as a much more controversial step than it is today.

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