Congress recently passed a bill confirming, for the first time that “climate change is real and not a hoax”. With that out of the way, America can officially begin to view the future of energy in a new light.
According to recent data from the U.S. Energy Information Administration, fossil fuels accounted for nearly 82% of America’s energy consumption, a number that has remained steady over the last few years. Recently the Keystone XL has become central to a heated debate over the environmental costs versus economic benefits of natural gas.
The price per barrel of crude oil has dropped to its lowest since 2008-2009. Fluctuating between 40 and 50 dollars, this figure is the result of oversupply by OPEC nations and the refusal of other producers to curtail production.
At the same time, the American government continues to wrestle with the contentious Keystone XL bill, a proposal that has environmentalists up in arms.
Keystone XL is an extension of North-American oil company TransCanada’s existing Keystone pipeline. The system covers nearly 3000 miles, delivering Canadian oil to refineries in the mid-west and southern United States.
The proposed extension is a shorter, wider, and more direct route from Alberta to Steele City, Nebraska that passes through sensitive environmental areas, sparking controversy.
Environmental groups point to an array of concerns. The threat of oil spill and leakage raises alarms for the highly sensitive landscape that includes one of the largest reserves of fresh water in the world, the Ogallala Aquifer.
Another worry is the extraction of crude oil from Canada’s oil sands. These tar sand regions provide a majority of the product running through Keystone XL, and research has shown that removing this crude yields more greenhouse gas emissions than conventional methods do. According to the Pembina Institute, a think-tank on Canadian energy, “average greenhouse gas emissions for oil sand extraction and upgrading are estimated to be 3.2 to 4.5 times as intensive per barrel as for conventional crude oil produced in Canada or the United States.”
The project will reportedly transport 830,000 barrels of oil a day and create jobs for people in the area, although the exact number is under heavy dispute.
As of February 2015, both Congress and the Senate have passed different versions of the bill, but President Obama maintains his position against it, having vetoed the proposal once and publicly demonstrating willingness to do so again.
The debate on Keystone XL over the past few years added a new wrinkle with today’s plunging oil prices. While the fluctuations won’t stop the production from current tar sands, a prolonged slump may inhibit future production. According to Amy Harder of the Wall Street Journal, the most efficient existing oil sands have breakeven points below $40 per barrel, while new production areas may require up to $90 per barrel.
However, TransCanada’s CEO, Russ Girling, recently spoke out against these concerns, saying that “Keystone XL is a project that was needed when the price of a barrel of oil was less than $40 in 2008, when we first made our application, at more than $100 last year, and around $45 today.”
Experts agree that the project still makes economical sense, but it is no longer a pressing necessity. Recent data from the federal government shows that the US imported more than 3 million barrels of oil from Canada per day, and U.S. refiners still hope to see the infrastructure built.
Bill Day Valero, spokesperson for Energy Corp., the biggest oil refiner in the United States, recently stated that the “ample supply of inexpensive crude oil would offset declining supplies from fields in Mexico and South America. That’s the case no matter what the benchmark price of crude is today.”
The fall of oil prices isn’t over. Most analysts believe that the price per barrel has the potential to drop to $30, and experts from Citi predict that prices will tumble even further before producers begin to limit production. The passage of Keystone XL will only contribute to the supply.
For the foreseeable future, oil prices will continue to plunge and eventually bottom out. Reliance on fossil fuels will decrease only infinitesimally over the next few years, while demand will remain across the globe. Barring the rapid introduction and commercialization of a viable alternative energy source, the price per barrel will recover. The question is how much the recoup will be.