Just this week, the United States Senate has narrowly failed to pass the bill that would created the much talked about Keystone XL Pipeline. There are many political reasons for this outside the scope of the class, but I'd like to take a look at some of the few implications associated with this bill that can be analyzed with what we have learned in class.
The Keystone XL Pipeline is in essence an oil pipeline covering the distance between Hardisty, Alberta, Canada, and Steele City, Nebraska. This stretch of pipeline would take a more direct route between locations of an already existing pipeline. The opposition is almost purely environmental in its motivation, citing oil independence and harmful impacts of implementing yet another pipeline as its prime arguments. I'll not get into any sort of discussion on that end because this is not a blog for an environmental economics class.
What does this mean for the United States in the way of trade? Surely the implementation of the pipeline would allow the United States to produce more oil for both domestic consumption and export. This means that the United State's demand for foreign oil decreases dramatically, while world supply of oil increases. Both of these would cause a serious drop in prices of oil world wide because the U.S. is a large country. This has an ambiguous effect on terms of trade for the U.S. as prices of imports goes down, as will the prices of exports. Not only will this cause a decrease in prices of oil but of almost every other good because of much lower transportation costs. This certainly improves welfare.
While this Keystone XL pipeline certainly improves the welfare of Americas and Foreigners alike, many people would still argue that there cannot be a price put on environmental sustainability.
The link to the article is http://www.bbc.com/news/world-us-canada-30103080
My links have a tendency to not work, so I'll name the article. on www.bbc.com the article is called "US Senate narrowly fails to pass Keystone XL pipeline bill"
You state that "the opposition is almost purely environmental in its motivation, citing oil independence and harmful impacts of implementing yet another pipeline as its prime arguments." And you do not want to get into it because this is not an environmental econ class. However, when you look at the big picture, a choice made today can have a positive, or in this case negative effect on the environment. That in turn can have an effect on what county's are able to grow or produce in the future. If you destroy the environment and change things it will all go full circle and eventually become a international economic issue.
ReplyDeleteI remember discussing this in class and how it would most likely benefit the United States economically. It is unfortunate that this bill failed to pass because I'm sure that everyone driving a car would love to see these drops in oil prices. This is a good example of how something can be economically beneficial but not politically popular. Sometimes it is very unfortunate that politics can have such a big impact on the economical decisions that are made because I'm sure many who oppose this bill might not if they could see the economic benefits.
ReplyDeleteI'm conflicted with the Keystone pipeline. As an amateur environmentalist I understand the potential environmental setbacks and it worries me. Even though I do drive a car I don't mind high gas prices. People drive less and tend to carpool more when gas prices are higher. Though I do understand how the decrease in oil prices would benefit all consumers, and perhaps if oil prices were lowered people wouldn't be as opposed to a gas tax to support construction and upkeep of our roads. Overall, I lean towards not supporting the pipeline, but in the end no matter what happens there will be benefits and losses.
ReplyDeleteAfter reading the article, I do not think the pipeline is needed just yet. The project would be privately funded, with no costs to us other than the possible environmental effects. However, these could be minimized with proper planning and regulation. There could also be a tariff implemented for the production of this “dirty” oil. Another thing to look at is the lower dependence on foreign oil producers. After looking at similar articles, I found that the pipeline will eventually be built once Republicans have control in Washington, D.C. I agree with Jamie that it is a shame how American decisions can be so heavily influenced based on political party ideas rather than economic proof of the potential gains. Personally, I am indifferent to whether or not the pipeline extension is built. The world is moving away from oil as the main source of energy anyways.
ReplyDeleteIn my opinion, I have always been in favor of the pipeline if they can do the best they can with environmental awareness. Politically, I have always been in favor, and after reading this article it appears that economically there would be no ramifications so that is just another bonus. The United States does not export a ton of oil as it is, so the decrease in our oil exports would be miniscule. The United States, however, does import a lot of oil so the decrease in the world price would have a greater effect positively rather than negatively on the United States terms of trade. The only thing holding this back appears to be environmental concerns. All other factors seem to point to it being a success.
ReplyDelete