Recently, Social Media is ablaze with memes and discussions about how the election of Joe Biden has precipitated the rise in gasoline prices at the pumps. Messaging such as: “Gas is at $2.89. This is what you voted for.”, “Joe Biden killed the pipeline and Gas is at $2.89” are proliferating via Facebook, Twitter, and other platforms. In reality, regardless of his or her identity or politics, the President of the United States has little to do with gas prices. (Presidents since Nixon have been saddled with the false narrative that they alone control gas prices.)
The roll back of previous protections allowing Fossil Fuel exploration on Federal lands leads one to believe that the United States must be self-sufficient, or close to it. So, the natural conclusion, based on that assumption, is that the government must be jacking the price of gas and petroleum products.
First, all of that drilling and exploration will not propagate refined products for some time. In fact, according to US Energy Information Administration (https://www.eia.gov/) “In 2019, the United States imported about 9.14 million barrels per day (MMb/d) of petroleum from about 90 countries. Petroleum includes crude oil, hydrocarbon gas liquids, refined petroleum products such as gasoline and diesel fuel, and biofuels (including ethanol and biodiesel). Crude oil imports of about 6.80 MMb/d accounted for about 74% of U.S. total gross petroleum imports in 2019, and non-crude oil petroleum accounted for about 26% of U.S. total gross petroleum imports.
In 2019, the United States exported about 8.47 million barrels per day (MMb/d) of petroleum to about 190 countries and 4 U.S. territories. Crude oil exports of about 2.98 MMb/d accounted for 35% of total U.S. gross petroleum exports in 2019. The resulting total net petroleum imports (imports minus exports) were about 0.67 MMb/d in 2019.
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The top five source countries of U.S. gross petroleum imports in 2019 were Canada, Mexico, Saudi Arabia, Russia, and Colombia.”
If you are scratching your head, you are not alone. We export nearly as much petroleum product as we produce!
Now, lets look at the conspiracy that the President (any President) is responsible for gas pricing.
According to Gasbuddy.com the price of gasoline has risen for the eighth strait week, bringing the national average for Regular to $2.73. The surge in gas prices across the company is partially due to refinery shutdowns in Texas and other southern states that experienced sever cold and weather events. Refinery outputs fell to 68%. Imports were curtailed as the Houston Shipping channel closed due to weather. In addition, more people are filling up at the pumps driving demand and raising prices. OPEC had decreased production last year as the Pandemic pummeled at-pump sales. The market, not the President nor the Oil Companies, set prices via supply and demand.
So, it must be the cancellation of the Keystone XL pipeline, right? No. The decision to end construction of the Keystone pipeline extension (there already is a Keystone pipeline, the controversy is the extension of the pipeline, a short cut of sorts, across the Ogalala Aquifer) may affect prices in decades to come. However, not at this time, as the existing pipelines are not running at capacity due to much lower demand vs. that of pre-pandemic production. Oil companies, which lost an estimated $50 billion dollars in 2020, are not drilling. (Not on federal land or private land). If these companies raise production, it will be from existing wells.
As long as we are discussing Keystone XL, we should address the meme that talks about how cancelling the construction of the pipeline will send the floundering economy into a tailspin from the loss of thousands of jobs.
Facebook and other social media outlets have published memes stating that job losses stemming from the cessation of construction would range from 12,000 to 83,000 jobs. In reality, 1000 jobs were lost. These positions were seasonal construction work lasting four to eight-month periods. There would have be 35 permanent positions needed to maintain the pipeline upon completion.
Why was the Keystone XL so controversial? When completed, the Pipeline would have carried Canadian tar sand oil from Morgan, Montana to Steele City, Nebraska. This would allow TransCanada to move its raw materials extracted from tar sands in Canada to refineries in Texas.
Tar sand oil is not like oil that sits in subterranean caverns waiting for drilling rigs to literally suck it out of the earth. Tar sands come from beneath forests. It is mixed with dirt, heavy metals, and other toxins. It is difficult to extract. Extraction is accomplished by strip mining forests, or through Steam Assisted Gravity Drainage (SAGD). The oil company drills beneath the forest and pump steam into the ground. The steam separates the Tar sand oil (Called Bitumen) from the soil and allows it to be pumped to the surface. The water for the steam comes from a nearby river. Tar sand extraction also depletes and pollutes freshwater resources and creates giant ponds of toxic waste. Refining the sticky black substance produces piles of petroleum coke, a hazardous by-product. The oil itself is toxic, containing heavy metals and chemicals, as a raw material.
The original Keystone pipeline has had 1 major spill and 11 minor spills. The Keystone XL would have traversed the Ogalala Aquifer. The Ogallala Aquifer, which traverses 8 states, aside from residential and commercial water consumption, supports an astounding one-sixth of the world’s grain produce, and it has long been an essential component of American agriculture. TransCanada in a report, estimated that the Keystone XL would experience 91 spills during its functional lifetime. Even a small spill from the XL pipeline would toxify the aquifer and destroy US grain production for years. The pipeline was also slated to travers Native American cemeteries and sacred sites.
Now for the coup de grace. Due to its composition, tar sand oil is expensive to refine. While it costs between $50 a barrel and $65 barrel to refine oil in natural deposits, it can cost $85 barrel or more to refine tar sand oil.
In the end, it is not a President, or a government, or a grand conspiracy that raises or lowers gasoline prices. It is simply supply and demand.