4 reasons Keystone won’t do anything to cut gas prices

Paul Brandus

Pipeline project may have its merits, but not for curbing prices

Will the pipeline ever get fully built?

WASHINGTON — Here’s a comment that has been making its way around Twitter and Facebook for the past few years.

Remember the awful crisis Obama inherited from GWB.

Here are GWB's gas prices the day Obama took Office.

“Look how cheap gasoline prices were back on Jan. 20, 2009!” folks say. The implication is that prices have jumped on President Barack Obama’s watch to the current national average of $3.34 because of him and his dunderheaded economic policies. That’s an increase of 80%. Impeach!

But here’s what folks who gleefully blame Obama for gasoline prices will never show you, much less acknowledge in their own minds:

Gasoline peaked at $4.11 in July, 2008 — just six months before plunging to $1.86. A drop of 54.7%.

 

Why the 55% drop between July 2008 and January 2009? Was there anything happening to the broader economy back then? Let me think. Oh, yes, that’s right: it collapsed. Silly me for pointing this out, but during those six months 3.6 million Americans lost their jobs — about 600,000 per month. GDP shrank at an annual rate of 1.9% between July and September — before collapsing at an 8.2% pace between October and December. Look at the data in fourth quarter: it was truly an economic collapse. Gasoline prices were certainly no exception.

Real GDP as Bush's term ended

Change from previous quarter at annual rate, seasonally adjusted

So if you want to give George W. Bush credit for bringing prices down over those six months, be my guest. But an economic collapse sure isn’t the way to do it.

 

Then there is this question: how did gasoline prices reach $4.11 in July 2008 in the first place? After all, they were just $1.47 when Bush was sworn in back in 2001. The answer is simple. The economy then, as now, was recovering from recession.

So here is my challenge to folks who think “Obama is to blame for high gas prices”: if you blame him for gasoline rising from $1.86 to today’s $3.34, a jump of 80% in nearly six years, then who do you blame for prices rising from $1.47 in 2001 to $4.11 in July 2008 — a jump of 180%?

 

Don’t get me wrong. Both sides play this same disingenuous game. Liberals who blamed Bush then were just as dumb, biased and myopic as the conservatives who blame Obama now.

 

Meantime, here’s another crazy-giant misunderstanding about gasoline prices: while I support building the Keystone XL pipeline, I’m not so naive as to think that it will have any impact on what I pay to fill up my SUV. Here’s why:

1.) The implication that we need Keystone to bring down gasoline prices suggests we need that extra supply to push prices down. Hogwash. The United States is drowning in oil and gas — production is booming and we’re the top oil producer in the world.

 2) We just don’t need as much gasoline as we used to. Broad trends are pushing per capita consumption down: cars get better mileage. Telecommuting is rapidly increasing. An aging population is driving less.

 3) We’re exporting record amounts of fuel. In May, U.S. refiners exported more than 15 million barrels of gasoline — nearly as much as they sold abroad for all of 1989. Global consumption is growing faster than it is here, and prices are higher as well. Imagine that: refiners are focusing on selling their products in markets that are growing and willing to pay more. It’s called the free market, folks.

No wonder that refiners slog the Gulf Coast want Keystone built. It’s more product for them to sell abroad.

 4) There’s some evidence Keystone might actually raise gasoline prices. Hold onto your wallet: a variety of studies have suggested that if Keystone is built, gasoline prices could rise up to 20 cents per gallon in the Midwest, Great Plains and Rocky Mountains. That’s because Keystone would divert crude from refineries in those regions to those on the Gulf for export.

 So who will be the big winners if the pipeline is built? Not you or me. The big winners for Keystone (other than the 35 permanent jobs it will create after temporary construction jobs go away) will be owners of refineries along the Gulf Coast. No wonder oil state senators in tough re-election fights like Louisiana’s Mary Landrieu, a Democrat and Alaska’s Lisa Murkowski, a Republican, are fighting to allow oil to be exported.

 

But this much is true: to build or not to build, it’s quite unlikely that Keystone will save any money for you at the pump.