As Rob told you last week, President Obama is doubling down on two of his most unpopular policies. One is his determination to use executive authority he doesn’t actually have to give amnesty to millions of illegal immigrants. The other – the one I want to focus on today – is his refusal to approval the Keystone XL pipeline, even though Congress may soon send him a bill that would do that very thing.
Of course, Obama’s State Department has long had the authority to approve the pipeline, which would pump oil from Canada all the way to the Gulf of Mexico. But they’ve dragged their feet because Obama’s left-wing political base hates fossil fuels and views Keystone XL as evil incarnate.
It’s not easy to justify this much foot-dragging, as it’s gone on throughout Obama’s entire presidency. And he proved it on Friday in Burma, when he made off-the-cuff remarks to the effect that Keystone XL would really not help the U.S. economically because it merely provides the infrastructure for Canada to sell its oil to the rest of the world.
That is completely wrong, both factually and as a matter of economic analysis. I am not shocked that a liberal president draws faulty conclusions from economic facts, but you’d think he would at least have a command of the basic facts and, after six years in office, would demonstrate some rudimentary ability to understand how markets work.
Yet he doesn’t manage any of this.
Let’s start with the facts. First of all, Keystone XL does not only transport oil from Canada. It will also transport light oil from North Dakota’s Bakken Shale. I realize North Dakota is a red state so maybe President Obama doesn’t give it much thought, but someone should let him know that North Dakota is part of the United States. Yeah. That’s real American oil being sent through the pipeline, Mr. President.
Surprise.
But his understanding of the economics is even more appalling. He argues that because the oil just goes from Canada to the gulf, to be sold to anyone in the world who might like to buy it, it won’t affect U.S. gas prices, hence his lack of interest in approving the project.
Wow.
The market for oil is global, and the price of oil is affected by production and distribution developments anywhere they happen. The cost of producing oil is only one factor in determining price. The cost of getting it to market is just as important. You’d think a president who is constantly demanding money for infrastructure would know this, but then you’d remember that only makes that demand as a way of justifying public spending. He really doesn’t know the economics of it at all.
Keystone XL makes Canadian oil much more economical to provide to world markets, thus allowing Canada to lower its sale price and putting price pressure on Middle Eastern oil producing nations. By the way, you know who would really suffer from the type of oil price reduction that Keystone XL could help bring about? Iran. The Iranians depend heavily on inflated oil prices to finance their nuclear ambitions, and when the global market becomes less dependent on the Middle East because it can buy from sources like Canada, it becomes much more difficult for Iran to make bank selling its own oil.
Not that I think he’s be interested in listening, but maybe someone should explain all this to the president. He clearly views the economics of Keystone XL only through the lens of left-wing political narratives, and that doesn’t lend itself to much real understanding of the issue.
We’re stuck with him as president for another two years, so it’s worth the effort to try to teach him something. His ignorance on this issue couldn’t be any worse than it is right now.
