Our Insufficient Oil 'Infrastructure' Problem Was Avoidable

Bill Hobbs | August 20, 2012 | 10:48am EDT
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The New York Times warns darkly that "The United States is increasing its dependence on oil from Saudi Arabia, raising its imports from the kingdom by more than 20 percent this year, even as fears of military conflict in the tinderbox Persian Gulf region grow."

The story goes on to explain the reasons for the increasing imports from Saudi Arabia, which include the Saudis agreeing to increasing oil production so that tighter sanctions on Iran wouldn't drive up oil prices. And the NYT does a fine job of explaining why imports of Saudi crude are rising again, after falling in recent years, even as domestic oil production also is rising:

“Domestic oil production has been surging the last three years and is up 10 percent this year. But most of the new production is coming from shale oil fields in North Dakota and Texas that produce high-quality sweet grades. Many of the refineries on the Gulf of Mexico coast are designed to refine the heavier oils that the United States has traditionally imported from Venezuela, Mexico and Canada,” the Times says, adding that with less oil coming from Venezuela and Mexico, Saudi's heavy crude is a suitable replacement.

Also, the moratorium on drilling in the Gulf of Mexico after the BP oil spill in 2010 has meant less oil from the Gulf, also leading to more imports of Saudi crude.

While rising imports from Saudi Arabia increase the risk to the United States given the seemingly rising possibility of hostilities in the Middle East involving Iran's nuclear program, the Times reports that “many oil experts say that the increasing dependency is probably going to last only a couple of years, or until more Canadian and Gulf of Mexico production comes on line.”

That's the good news. But there's a catch. As the Times notes, we don't have sufficient “infrastructure” to move that Canadian crude to U.S. refineries. Although it doesn't mention it by name, the Times is referring to the Keystone XL pipeline project, currently blocked by the Obama administration.

“In the United States, several oil refining companies have found it necessary to buy more crude from Saudi Arabia and Kuwait to make up for declining production from Mexico and Venezuela, insufficient pipeline connections between the United States and Canadian oil sands fields, and the fallout from the 2010 BP disaster, which led to a yearlong drilling moratorium in the Gulf of Mexico,” the Times says. “Mexican and Venezuelan production has been sliding the last few years, and much of that oil has been replaced by Canadian oil from oil sands. While Canadian production has been increasing rapidly in recent years, there is not enough pipeline capacity.”

“Until we have the ability to access more Canadian heavy oil through improved infrastructure, the vulnerability will remain,” David L. Goldwyn, former State Department coordinator for international energy affairs in the Obama administration, told the Times.

The Keystone pipeline – actually, phase 4 of the project, which is the part that Obama administration has blocked – would carry an estimated 830,000 barrels of oil per day into the U.S.

That's more oil than the amount that total U.S. imports from the Persian Gulf region has surged this year – up to 2.6 million barrels per day in May compared to 1.9 million in December 2011, according to Times.

Various news stories about the Keystone project indicate it would take approximately three years to construct the 1,700-mile pipeline once it gets the go-ahead.

The Keystone pipeline has been in limbo for almost four years.

The lack of sufficient "infrastructure" to bring Canadian crude to U.S. refineries - a key reason the Times cites as resulting in the worrisome rise in oil imports from the Persian Gulf - was an avoidable event.

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