Obama Picks Oil: “We’re Drilling All Over The Place…”

No issue has become a more significant election-year “hot button” than gas prices, with prices at the pump spiking to seasonal record highs thanks to an unpredictable global oil market.

Naturally, the pain at the pump has led to unfettered political grandstanding from both sides, with both Democrats and Republicans each claiming to outdo the other side in “solving” the problem through aggressive expansion of American energy exploration and pipelines to get more oil in our cars and SUV’s.

But what if the political establishment’s “solution” actually compunds the problem?  Are lawmakers leading the country into an even greater energy crisis by clamoring to “drill, drill, drill”?

At the fore of the partisan sniping over gas prices has been President Obama, attacked by conservatives for what they insist has been a flawed policy that has failed to adequately increase domestic energy production and open new territory to oil and gas companies in the hopes that thev will lower prices.

Nothing has defined this broader argument more than the fight over the Keystone XL oil pipeline, a proposed behemoth that would transport oil derived from tar sands from Canada all the way to the Gulf Coast. The project is highly controversial among residents of the Great Plains where the pipeline would traverse and among environmental experts. Concerns over habitat destruction, impacts on clean water supplies have led to calls for Keystone to be abandoned, not to mention how the addition of another supply of fossil fuels would serve to feed the nation’s addiction to oil.

Whether or not in response to pressure from environmentalists and local communities, President Obama rejected the initial propose pipeline route back in January, setting the project back and leading to hope that Keystone XL would soon be permanently scuttled.

Cue political mayhem… Hardly a blip on the national scene when the decision was first announced, Keystone became a firestorm once gas prices began to skyrocket and Republican and Democratic lawmakers — lobbied extensively by the corporations behind the Keystone pipeline — saw a chance to score political points of of their support for a project that proponents insisted would be the nation’s savior when it came to crippling pain at the gas pump.

The public turned on Obama over gas prices, with polls showing the issue dragging down the president’s otherwise improving  favorability ratings as pump prices climbed higher.

On Thursday the president completed an astonishing 180-degree flip on the issue of Keystone XL, traveling to Oklahoma as part of a multi-state “energy tour” designed to boost the public’s confidence in his ability to tackle gas prices and show off what has become an oil-dominant energy policy to voters.

In Cushing, Oklahoma, site of the southern hub of the proposed Keystone route, Obama delivered a major address saying that the oil pipeline was now a “priority” and giving his administration orders to fast-track the southern segment of Keystone XL — the massive chunk representing more than half of the entire pipeline proposal.

President Obama visited an oil repository in the solidly red state of Oklahoma today to announce plans to fast-track the southern leg of the controversial Keystone pipeline amid Republican criticism that his administration is not doing enough to tackle rising gas prices.

“I am directing my administration to cut through red tape, break through bureaucratic hurdles and make this project a priority,” the president told the crowd gathered at the cold, muddy pipe yard near the starting point of the southern portion of the pipeline.

Defending his energy strategy, Obama continued to argue that his administration is receptive to domestic drilling, even if he has not given the go-ahead for the full Keystone XL pipeline, which would run from Canada to the Gulf of Mexico.

“We’re drilling all over the place, right now. That’s not the challenge. That’s not the problem. In fact, the problem in a place like Cushing is that we’re actually producing so much oil … that we don’t have enough pipeline capacity to transport it all where it needs to go,” he said.

Obama announced a new Executive Order that would make permitting the southern leg of the pipeline a top priority. The move also established a multi-agency task force to identify the most urgent projects and create a roadmap for permitting them by the end of May.

Neither side of the oil debate is supportive of Obama’s retooled strategy on Keystone. Energy industry lobbyists and special interests groups derided Obama’s plan as not enough, demanding “greater access” for energy exploration in pristine lands and waters across the United States.

Environmental groups expressed outrage at what they consider a betrayal from the White House. Despite the rhetoric and attractive flourishes from candidate Obama and — early on his his first term — President Obama regarding climate change and a desire to update America’s archaic energy strategy, the bottom line is that this administration has p0resided over more domestic oil production and a greater expansion of the domestic oil industry than any in the nation’s history. Obama has decided not only to not stand in the way of oil as the country’s dominant energy source, he has cheered the industry on.

Critics have responded with understandably harsh reviews of Obama’s Keystone flip-flop and the administration’s overall energy policy and the shreds left of its directives on climate change.

Writes Bill McKibben:

Barack Obama has done a little more than his predecessors about climate change. But nowhere near enough. And no movie producer, fifty years from now, will be able to resist a scene that explains the depth of our addiction to oil: the president coming to the state that just recorded the hottest summer in American history, in the very week that the nation has seen the weirdest heat wave in its history, and promising not to slow down climate change but instead to speed up the building of pipelines.

But what if the policy cheered by the oil industry, the political establishment, lawmakers on Capitol Hill and finally adopted by President Obama is, well, flat wrong? What if sacrificing human health and environmental protection for cheap oil is a flawed equation?

Bloomberg reports that completion of the Keystone XL pipeline, the project deemed a national necessity to combat rising pump prices, would actually lead to higher gas prices in the United States — perhaps by as much as 20 cents a gallon.  While American consumers would get stuck with rising prices, the result would be a huge boon to big oil and gas companies, with giants like ExxonMobil poised to reap as much as $4 billion in extra profits should Keystone be built.

TransCanada Corp. (TRP)’s Keystone XL oil pipeline, a project backers including Republican Presidential candidate Rick Santorum say will create cheaper U.S. gasoline, instead risks raising prices as much as 20 cents a gallon in the Midwest, Great Plains and Rocky Mountains.

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The purpose of the $7.6 billion Keystone is to move 830,000 barrels of oil a day from landlocked Alberta to the Texas Gulf Coast, obtaining new customers and a higher price for heavy Canadian crude, Canadian regulators said in a 2010 report. The oil sold for $23.38 less per barrel in 2011 compared withheavy grades of Mexican crude, according to data compiled by Bloomberg.

“The Canadian plan was to use their market power to raise prices in the United States (UNG) and get more money from consumers,” Philip Verleger, founder of Colorado-based energy consulting firm PK Verleger LLC, said in an interview. Prices may gain 10 to 20 cents in central states, he said.

Producers including Exxon Mobil Corp. (XOM), Suncor Energy Inc. (SU) and Cenovus Energy Inc. (CVE) may reap as much as $4 billion more in annual revenue if prices rise as expected following the construction of the 1,661-mile (2,673-kilometer) Keystone XL conduit, the 2010 report says.

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Canadian producers will be able to charge more for their oil after Keystone XL is built, boosting revenues by $2 billion to $3.9 billion, Canada’s National Energy (TAQA) Board said in the 2010 report approving of TransCanada’s pipeline plan.

The discount on Canadian crude “should be avoided in the future” if the pipeline were built, according to the report.

Completion of the entire pipeline would raise prices at the pump in the Midwest and Rocky Mountains 10 to 20 cents a gallon, Verleger, the Colorado consultant, said in an e-mail message.

Even beyond Keystone, the call to ramp up domestic oil production is an attractive one for lawmakers looking to impress voters with their ability to tackle the crisis over high gas prices.

The oil industry and political establishment has consistently taken the view that the only way to reduce prices at the pump is to aggressively expand oil exploration and production in U.S. territory. The theory goes that the more domestic oil that flows, the more dollars and cents will be lopped off the price at the gas pump.

That’s simply not true. The Associated Press reports that a comprehensive study looking at the price of gasoline and the level of domestic oil production finds “no statistical correlation” between how much oil is produced in the United States and gas prices.

Example? Domestic production of oil is at its highest point in a decade, but so are retail gasoline prices — topping $4 a gallon in most places.

It’s the political cure-all for high gas prices: Drill here, drill now. But more U.S. drilling has not changed how deeply the gas pump drills into your wallet, math and history show.

A statistical analysis of 36 years of monthly, inflation-adjusted gasoline prices and U.S. domestic oil production by The Associated Press shows no statistical correlation between how much oil comes out of U.S. wells and the price at the pump.

If more domestic oil drilling worked as politicians say, you’d now be paying about $2 a gallon for gasoline. Instead, you’re paying the highest prices ever for March.

Political rhetoric about the blame over gas prices and the power to change them – whether Republican claims now or Democrats’ charges four years ago – is not supported by cold, hard figures. And that’s especially true about oil drilling in the U.S. More oil production in the United States does not mean consistently lower prices at the pump.

Sometimes prices increase as American drilling ramps up. That’s what has happened in the past three years. Since February 2009, U.S. oil production has increased 15 percent when seasonally adjusted. Prices in those three years went from $2.07 per gallon to $3.58. It was a case of drilling more and paying much more.

U.S. oil production is back to the same level it was in March 2003, when gas cost $2.10 per gallon when adjusted for inflation. But that’s not what prices are now.

That’s because oil is a global commodity and U.S. production has only a tiny influence on supply. Factors far beyond the control of a nation or a president dictate the price of gasoline.

So if domestic oil production is meaningless, and the Keystone XL pipeline will actually raise gas prices, what would Americans be getting from these two projects if lower gas prices are out of the mix? The consequences could be very expensive and very messy.

Tar sands from Canada are arguably the world’s dirtiest form of mass-produced fossil fuels, from the inefficient process used to exploit the oil from Canada’s sand fields to the finished product itself. Images show the rapid destruction of Canada’s once-pristine forests after they are targeted for oil sands production.

But Keystone’s  ramifications also will be felt in the United States. Beyond higher gas prices, the threat of a spill along the hundreds upon hundreds of miles of massive pipeline associated with Keystone is significant, with experts saying that it’s a “question of when” the line is going to spill, not “if.” And such a spill would be devastating in terms of both environmental and economic impact, wrecking large swaths of the states where the projected pipeline route will snake through.

Republicans have sought to frame the Keystone XL pipeline as a job-creating project being thwarted by “radical environmentalists.” Is it? A new Cornell University study claims that the pipeline could actually have a negative impact on the economies of the states it would pass through.

“In the national debate, job creation has been set alongside environmental concerns in a rigid either-or fashion,” says Sean Sweeney, one of the study’s authors, “But oil spills also kill jobs, they consume resources, they have an impact on health, and can also lead to a lower quality of life.”

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If Keystone were to leak — or worse, rupture — the consequences could be serious. In July 2010, a pipeline operated by the company Enbridge ruptured — the company has never explained why — spilling 1 million gallons of tar sands oil into Michigan’s Kalamazoo River. The oil drifted 40 miles upstream, causing 145 reported instances of illness and health problems for people living in the riverside community of Marshall, Mich. Marshall residents living within 200 feet of the river were eligible for a buyout program; about 130 people sold their houses to Enbridge, leaving some areas uninhabited.