Keystone XL Isn't a Threat to the Environment; It's a Threat to Venezuela

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News filtered down this week that, to try to help hanging-by-a-thread Louisiana senator Mary Landrieu, the outgoing Senate Democratic leadership may allow a vote on the Keystone XL pipeline during congress’s lame-duck session. This would give Landrieu one more chance to suck up to her voters by … once more screwing Venezuela.

The same Landrieu who killed the sanctions bill against Venezuelan officials known to have violated human rights is now actively scheming to secure a vote that could, over the longer term, do more damage to more Venezuelans than anything else on the U.S. political agenda right now.

What does this lady have against us, anyway?

Of course, President Obama could still veto the bill: he’s under intense pressure from environmentalists who, for some reason, have decided that this – Keystone XL – is the hill they will die on.

It’s really quite odd, Keystone XL. Think about drugs: educated people generally have no trouble seeing the hopelessness of a supply-interdiction strategy. People grasp that the War on Drugs can’t work: if you crack down on production in one place, you just fatten up the margins for producers in another. Crack down on trafficking here, and you create extra rents to trafficking over there. The “balloon theory” to explain the futility of supply-disruption policies is not in serious doubt.

And yet, suddenly, ask a gringo leftie about applying the same damn lesson to oil and everyone goes insane.

I like to think of it as Keystone XL Derrangement Syndrome: the way perfectly reasonable North American environmentalists take leave of their senses when this benighted pipeline is mentioned. Thinking that not building the pipeline will somehow decrease oil consumption makes no sense.

And yet, I really hope they succeed in stopping it: not because I think it’ll make the slightest bit of difference to Greenhouse Gas emissions – it won’t – but because deep down, beneath the sedimentary layers of cynicism, I’m still a Venezuelan patriot, and Keystone XL is a disaster for Venezuela.

The strategic picture gets blurred in all the derangement. But back to basics: Keystone XL is designed very specifically to elbow Venezuelan heavy crude out of the Gulf Coast refining market.

The whole idea that if you stop Keystone XL, somehow less oil is produced and consumed is infantile: the question isn’t “how much?” it’s “where from?” (And if you think exploiting the Orinoco Belt is less environmentally dicey than piping oil through Nebraska, there’s a mountain of coke in Jose I’d like to sell you.)

If the Venezuelan government had the bandwidth to think longer term – which it manifestly doesn’t – it would grasp Keystone XL as a key strategic threat. The main reason anyone would want to take Canadian oil to the Gulf Coast is because that’s where the refineries that can handle crappy, high-sulphur, high-tar content crude are. And the whole reason they’re got built there in the first place is to handle Venezuelan crude. This is why KeystoneXL is such an important piece of the North American Energy Independence puzzle: it’s what it takes to shut Venezuela out of the North American market.

Of course, a government that’s long made it positively a policy goal to shift Venezuelan production away from the U.S. may not be able to register that as a threat. Ideology is always going to prevail with them. But that’s only the umpteenth policy mistake the Venezuelan government made today before breakfast.

Even in a post-Keystone XL future where Venezuela doesn’t have access to North American energy buyers, Venezuela will find buyers for its oil, of course. It’s just that it will have to ship that oil further to get it to refineries that will need to be reconfigured (or built from scratch) to handle it, and each part of that costs money: money Venezuela could use for any of the thousand pressing and growing policy problems going unaddressed right now.

Listen, Venezuela wastes so much money in so many crazy ways right now, it’s easy to get blasé or, worse, to give in to the nihilism that says “well, it’s just money that would go to chavistas anyway, who cares?”

BS. This isn’t about chavistas or non-chavistas, this is about bedrock national interest. Stopping Keystone XL should be one of Venezuela’s top foreign policy priority regardless of who is in power.

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1 COMMENT

  1. In a competitive market system a lower priced product almmost always pushes out a higher priced product , Keystone XL will help improve the competitiveness of Canadian tar sands oil vs Venezuelan heavy crudes, If market economics allow such increased competitiveness to favour US interests , then ultimtately its going to happen and for the US thats what rationally should happen .

    Thats why having a Citgo is so important , because Citgo is not just a group of refineries , its a marketing system , it can choose to keep flows of Venezuelan oil and refined products flowing into the US market even if the comepting price of other sources of oil dont allow it to make as much profit as it used to. Lets not forget that thats the reason why the Citgo refinery and marketing network was created in the first place . Pdvsa figured that some day prices of crude would fall and desperate competitors would attempt to expel Venezuelan oil form the US market by lowering its prices but if you had a Citgo you would be able to maintain your presence in that market and keep the money flowing .

    The other thing to consider is that producing and transporting tar sands crude is expensive as hell , even with the Keystone XL and that producing and transporting crude and products from Venezuela to gulf coast markets ( in a well run operation) is probably going to continue to be cheaper than the Canadian option. The big if of course is ‘in a well run operation’ which we all know doesnt characterize Pdvsa current operations.

    There are of course other refineries in the Gulf Coast areas which are not controlled by Citgo and which potentially might substitute Venezuelan crude imports with Canadia crude supplies , so that it could happen that the Keystone pipeline may make Venezuelan crude more difficult to sell to those refineries if the economics of bringing Canadian tar crudes favour the latter option . that cant be helped and should be accepted as part of the game .

    The thing for venezuela is not to oppose the Keystone pipeline project , thats ultimately futile but to improve the competiveness of its operations, and the competiteveness of its oil , use its Citgo refining and marketing facilities to keep Venezuelan oil flowing to the US market and get used to a different competitive enviroment which may not be as favourable as it used to be . Thats what the coal producers did a hundred years ago when oil replaced it as the primary source of energy , they adapted , they survived and they are still there as a business.

  2. The Americans are desperate to refine all that Mexican heavy crude too.

    “The Obama administration could grant Pemex’s request under an exemption that permits so-called swaps or other exchanges. In such a deal, the U.S. could trade the light sweet crude oil for a heavier oil from Mexico that refineries in Texas and Louisiana are set up to process. No action is needed by Congress.”

    http://www.bloomberg.com/news/2014-09-16/mexico-s-interest-in-u-s-oil-seen-opening-export-door.html

    NAFTA is such a self-sustaining energy powerhouse that it’s not even funny. The revolutionary workers at PDVSA should indeed start learning Chinese asap.

  3. Ironic how the wonderful 21st Century Socialism can’t survive without the wonderful 21st century capitalist oil money flowing in a parasitic symbiosis. If the Chavistas weren’t such greedy ideologoical hypocrites, they would have quit selling oil long ago and starved for the revolution .

  4. While I don’t see eye to eye with your analysis of how externalities (including your comparison oil=drugs?) should be treated, adding tar sands oil to the market will reduce the competitiveness of venezuelan oil if the tar sands producers can sell at a lower price. Otherwise i don’t see the argument. Plus refineries might take venezuelan oil anyway, it’s a question also of capacity.

  5. Como decían; “el arrechito murió cagando”…. a nadie mas que los venezolanos se les puede culpar por lo que ha ocurrido en Venezuela. Llevan que jode rato reventándole el culo a los gringos y ahora buscas que ellos los salven? que abran esa tuberia y que se jodan los chaburros. A menos que le corten en suministro de billetes a esos HDPs la vaina va a seguir igual. The choices you make have consequences.

    • ¿Quién sabe? quizá ese sea el impulso que necesita Venezuela para aprender que la riqueza la aporta el trabajo y no los recursos.

      Yo lo veo ganar-ganar. Los gringos obtienen combustible más económico, Venezuela obtiene lo que merece.

  6. As for the Venezuelan Government, like a lot of people, they think they will get what they want when they likely will get what they deserve. However, from a straight environmental perspective, the Keystone XL pipeline makes lots of sense. Whatever, the Harper government is committed to sell its oil abroad. The alternative to this pipeline is a terminal at Kitimat to feed the Asian market and that is an environment nobody wants to see a super tanker into. Very easy to get another Exxon Valdez disaster in such a place.

  7. “he’s under intense pressure from environmentalists who, for some reason, have decided that this – Keystone XL – is the hill they will die on.”

    Quico, Not sure how much you have read on this topic, but there are some prominent gringo environmentalists who think it was a big strategic mistake to “make this the hill they will die on” and are not particularly happy with those who did. The overall environmental effects will be negligible, and the importance placed on it seems to be out of proportion to its real effect.

    http://www.newyorker.com/magazine/2013/09/16/the-president-and-the-pipeline

    • Thanks for that excellent link, here an excerpt:


      Much of the gasoline, diesel, and other fuels produced at Valero is sent north by pipeline. “If you’re consuming product anywhere in the Northeast United States, the majority of that product is made on the Gulf Coast,” he said. The rest is sold in foreign markets, a fact that Steyer and other opponents of Keystone have seized upon to argue that Canadian oil would do little to achieve oil independence for America. But there’s a world market for refined products, and American refiners sell according to market demands, no matter what country they buy their crude oil from. Keystone wouldn’t change that basic fact of the international oil market.

      Gentry favors approval of the Keystone XL. He said that he needs three hundred and forty-five thousand barrels of oil a day, and having a pipeline of crude that would terminate up the road would be ideal. He currently buys his foreign oil from Venezuela, Mexico, and Russia, and the reliability of a pipeline beats the costs and potential delays associated with tankers. “When the weather kicks up, or there’s a hurricane in the Gulf, ships get delayed four or five days,” he said. He laughed when I said that the Canadian Ambassador to the U.S. had told me that Keystone was being built at the request of Gulf refiners. “Is that right?” he said. Gentry’s main concern was in receiving a reliable supply at the best price. He also disagreed with the State Department’s claim that, without Keystone, Canada would simply ship its oil by rail. Bringing Canadian oil to the Gulf by rail is too expensive, he said: “They would have to drop the price of their crude.”

      So keystone will depress oil price sure, but shipping Venezuelan oil to southern USA is still easier than over to China

      • The big losers if the Pipeline gets built are the railroads that now transport the canadian crude to where the pipelines dont reach, quite sure they make a lot of money transporting that crude . It wouldnt surprise me if they are behind some of the enviromentalist efforts to stop the pipeline using front organizations , funding genuine ones , having awful things published about how the pipeline will ruin the land etc. If you know anything about the US Coal business you know that the railroads have a stranglehold on the transport of coal from the big open coal mine fields of the west to the Power plants in the East and defend coal moving west to east with ferocious ruthlesness . The US is a country where special business interests of all kind have many ways (not all of them Kosher) to make their influence felt in defense of their interests.

        One thing which hasnt been said is that because Venezuela has shifted the production of its oil from light crudes to heavier crudes they may not be able to continue to supply Citgo as before , the stats show that they are dropping their shipments to Citgo more and more , presumably to send more oil to china but maybe because they can no longer supply cigto with the kind of crudes it needs.

        • The big losers if the Pipeline gets built are the railroads that now transport the canadian crude to where the pipelines dont reach, quite sure they make a lot of money transporting that crude/

          That would be Burlington Northern. Guess who owns Burlington Northern? Multi-billionaire Warren Buffet. Guess who Warren Buffet supports? Obama- the biggest opponent of the Keystone pipeline. Las Matemáticas No Fallan, pana.
          And the mainstream media in the US is so abject that it has never asked President Obama about this.

  8. Francisco, you surprise me with this analysis. Your focus, in my estimation, is a bit narrow. From a global perspective (think the Orinoco), even though for the US the risks may be less, the environmental impact for Canada is severe. What we are watching all around us is the powerful few (oil companies, congressmen and women) playing their cards to their own narrow interests. Saudi Arabia’s spigot strategy is doing a better job in damaging the economic prospects of the Venezuelan government (but perhaps not the country’s?). At the end, economics alone will most likely be the agent that kills the keystone pipeline project.

  9. I wonder if anyone has run the numbers on Keystone at something around the current price of a barrel of oil or lower for an extended period. It may actually turn out to be a purely symbolic fight for the “drill baby drill” crowd as well, no?

  10. You reap what you sow. People who are weak threaten – people who are strong take action. It is no coincidence that ever since Chavez and now Maduro began threatening the US and hurling insults, the US has been quietly and consistently taking action by reducing its imports from Venezuela. There is of course no public policy that says that is the goal because there would give us even more impotent chest pounding and low class insults being hurled at the imperialists. What a shock, you tell a country to GFY and then wonder why that country is seeking alternative sources of oil, the one export your country’s very existence depends on. These events are the direct result of the complete inability of the government to diversify the economy. In fact they have actually made Venezuela even more dependent on oil than Venezuela has ever been, thanks to greed, corruption and incompetence of the new socialist oligarchs of Venezuela. The nouveau riche of Venezuela with their silk suits and gaudy watches is a living example of George Orwell’s 1984 and Animal Farm all rolled into one. There may even be a grand conspiracy between the US and Saudi Arabia on oil and Venezuela but that’s what you get for being small minded and completely self centered, greedy and corrupt. and then think you can survive in a bubble on this planet. Of course, for some time you can until the gravy train comes to an abrupt end. Civil war in Venezuela will occur when the populace breaks and turns ugly led by the collectivos, who thanks to Chavez used his infinite wisdom in arming them. Venezuela is the living example of the fact if people do not know history they will be doomed to repeat it. If Venezuela had respected the relationship between the US and Venezuela they could have had some influence but to even suggest that the US should even consider any argument from Venezuela at this point in the dialogue is beyond a joke. You reap what you sow, and acting like a spoiled child only underscores the ineptitude of Venezuela. If the Chavista’s cared two bits for Venezuela and its people they would have stopped this madness years ago. They told the US to GFY and said they have “new partners” in Russian and China. Those so called partners , Russia has dumped billions in surplus weaponry on a blustering dictator who longed to be respected but never really was, and China who has cut sweetheart deals (in exchange for huge kickbacks) such that the few people left in Venezuela who actually care would now say that you know those imperialists never screwed us the way the Chinese are now. Chavez has mortgaged the future of the next generations to the Chinese who in the end will suck Venezuela dry of all of its resources at bargain basement prices. You reap what you sow. You ignore the rule of law – you reap what you sow, you ignore human rights – you reap what you sow, you ignore international norms – you reap what you sow. It is no more complex than that. I would wish good luck to Venezuela but it would do no good with this government.

    • “US has been quietly and consistently taking action by reducing its imports from Venezuela.”

      Imports from Venezuela have reduced because of the oil boom in Canada and the large increase in domestic production. This was never a conscious decision of some government committee to decrease imports from Venezuela; imports from all OPEC countries have decreased in recent years.

      • Yes, that was my point, it was not so much a conscious decision to reduce imports from Venezuela but to conscious decision to obtain more secure oil reserves, first the US and then Canada and then Mexico in that order, in terms of security. I am sure that when it was understood that imports from Venezuela would be reduced as a result of increasing the more secure supplies, the US government’s reaction was something akin to scrapping sh*t off their shoes. Oh, and be careful to not step into it again. If that causes great heartache in Venezuela, as I said, they reap what they sow. If they want to play at the adults table in this world then they need to start acting like adults and taking responsibility for their choices and not acting as if any consequences to their actions is underserved. Like supporting North Korea. Why on earth would ANY western government want to lift a finger to help Venezuela, because of the choices they have made. And since they have made their bed with China and Russia, how is that working out for the people of Venezuela.
        Not so good is my guess.

  11. Hopefully some govnt officials are reading this. At some point its not about the govnt but avoiding (more) pain for the venezuelan people.

  12. Toro.

    Building that pipeline would be just right for this country. Or are we supposed to live on tar and socialism forever?.

    This country needs a final blow. If Keystone XL carries a potential fuckup to our oil industry, so be it. Build the fucker. Every thinking venezuelan should be thankful for it.

    Maybe nos ponemos las pilas and get to understand how modern nations produce wealth.

    I’m salivating to the idea of a marginally profitable (even more so…) PDVSA. A PDVSA without the muscle to steer the country wherever the bolichico de turno wants it.

    • Francisco you should research more about the reason the environmentalists in the US opposed the pipeline, greenhouse emissions is not the main reason. Overall environment risk negligible, come one.

    • This one takes the cake:


      “Understand what this project is,” Obama said last week while on a visit to Myanmar. “It is providing the ability of Canada to pump their oil, send it through our land, down to the Gulf, where it will be sold everywhere else. That doesn’t have an impact on U.S. gas prices.”

      I understand that Obama is a lawyer, but c’mon, supply is supply!! That statement is what you’d expect from a chaveconomist.

      • He is a pol in a tight corner trying to drum out explanations that take the heat away from his position even if he knows they dont make all that much sense. Most of the business people want it and a huge swath of public opinion also , still the enviromentalist are part of his constituency and he cant afford politically to offend them. If Venezuelan supplies are pulling out of the US market either because the crude Citgo and other gulf refiners need is no longer being produced or for other reasons then having Canadian crude be able to reach the Gulf Coast is not bad for the US . If Mexico really starts increasing its production in the mid term they will be very interested in bringing their oil to the gulf refineries ( specially as much of it resembles Venezuelan crude in many ways) , having lots of oil compete to get sold in the US isnt going to hurt the US consumers pocket.

      • Actually, the overall affect on the price of gasoline in the US would be very, very small (roughly .02 a gallon).

        The economic effects of the pipeline have been exaggerated by the its supporters, just like the environmental impact has been exaggerated by its opponents.

        • I am guessing that number depends on demand elasticity. It strikes me that 700 kbpd is a significant amount of additional production (~4% of current US consumption).

          • But of course, if world production is ~90 Mbpd and gas is $3/gallon, then 700 kbpd means an increase of just a few cents, a small drop in the bucket.

  13. This threat didn’t sound any alarms because tanking oil prices have the red phone ringing off the hook. They also have our esteemed Chancellor Ramírez travelling the world to “defend” the country from dipping oil prices as if it were an attacking army. As if it were crime (oh, wait…).

    • That result was expected though,
      anyway republicans will certainly pick up the bills next year so…

      You can count that the Keystone pipeline will be approved one way or another.

      • I agree with you. The GOP is coming, thus, it’s not a matter of ‘if’ anymore, but of ‘when’.

        This pipeline will make the US less dependent on oil coming from outside North America: everything that all GOP voters want. This is not about lower gas prices or environment bullcrap that Americans couldn’t care less, this is about national security and autarky.

  14. “What does this lady have against us, anyway?”

    I guess she miss the memo where she will be working in the interest of the Venezuelan People instead of you know, Her constituents, the People she represents.

  15. “…money Venezuela could use for any of the thousand pressing and growing policy problems going unaddressed right now”. It’s been 15 years since Chávez opened the gates wide and let Cuba and many other countries sweep by and take our resources away. Do you really think they are interested in using income from oil to solve any local issues? I want some of whatever it is you’re smoking.

  16. This is a ridiculous sentiment. What on earth can Venezuela manifestly do to impact ANY policy regarding Keystone XL? It may or may not happen. While its a threat to Venezuela, its a threat outside of its control, and another indictment that if Venezuela has any hope for the future, its in somehow finding a way to diversify its economy. I hate the oafish mentality of the regime as much as you do, but in this instance I can barely fault them on any fate that rests upon US policy regarding this pipeline.

    The ascendancy of US domestic oil production in the past five years is threatening to Venezuela, but it’s also the best counterargument to shmucks who argue that the US wants to control Venezuela’s interests all for the difficult to refine oil surrounded by broken infastructure and systemic corruption. Its the height of ridiculous. It’s now easier, cheaper, and more straightforward to extract oil from sand pits in North Dakota than it is the Orinoco, and who is to blame for that?

    Rather than bemoan Keystone, it should be looked at like a wake up call. And it should also underscore the bigger danger to Venezuelans than even this disaster of a regime: Before the oil boom there were 3 million Venezuelans. Now there are 28 million, all dependent upon one commodity to sustain an entire economy. The problem here is much bigger than one distribution channel.

    • Are you kidding. Countries do things ALL THE TIME to try to affect decisions in other countries that directly affect their national interest. It’s called diplomacy!

      Hey, Canada does it. This ad, for instance, was in Washington DC bus stops this summer ->

      If Venezuela had the slightest bit of foresight it’d be out agitating against it.

      • No doubt, but what political capital does Venezuela have with the U.S. right now? None. A slick PR campaign to capture the public imagination might be a good idea. But allocating a budget just for that would surely defund the whole of Venezuelanalysis, and then where would the regime be? 😉

        • Both China and Russia pay for a multipage insert to the Washington Post once a month. They are very well done and provide slick propaganda for each government on topics that are of note at the time of publication. Other governments do occasional, similar one-off inserts with the Washington Times, which costs much less but gets to a lot of power brokers in town, almost as much as the Post, at least as far as conservatives.

  17. Under Chavez Venezuela with high oil prices burst upon the world scene as a low class nouveau riche bully, using his oil wealth as a blunt instrument to buy support and “new Friends” from Petro Caribe to Bolivia and on down the line. Of course the Castro’s played Chavez like a Stradivarius, old “Dad” putting his arm around hi newly found “son Hugo, and Hugo then let the foxes into the hen house. Now that they have no extra wealth to buy friends or keep the ones they used to have and those so called friends have abandoned them.
    Ramirez going around the world asking for production cuts from the other OPEC members but you don’t hear in the dialogue is how much is Venezuela going to cut its production. Since Maduro has no charisma at all he cannot carry the message like Chavez did so they are left to their own greed and corruption and have at best a reactive government with no pro-active plan. It is ironic that this whole revolution was started to help the poor of Venezuela and in the end it is the poor who have been hurt the most. Absolute power corrupts absolutely.

  18. KEYSTONE XL IS FIRST AND FOREMOST AN EXPORT PIPELINE. The oil industry is intensely focused on this pipeline because it will enable them to transport tar sands from Canada through the United States to the Gulf Coast where it can be exported overseas. The top beneficiary of oil from Keystone XL, Valero, has a documented export strategy which it will accomplish tax free due to its ability to operate in a “Foreign Trade Zone” in Port Arthur, Texas. In fact, three of Keystone XL’s shippers (Motiva, Total and Valero) operate refineries in a “Foreign Trade Zone” exempting them from tax, customs duties on imports and exports. The oil industry needs this deepwater port since the Canadian people have not yet allowed a major tar sands oil pipeline to be built to their west or east coasts–in fact the two pipeline proposals currently under consideration to the Canadian coasts are being held up by public concerns similar to those around Keystone XL in the United States.
    ( The people of Canada do not want these pipelines built across their country either )

    TransCanada is using Eminent Domain to take Americans land for their pipeline!!

    A Canadian company has been threatening to confiscate private land from South Dakota to the Gulf of Mexico, and is already suing many who have refused to allow the Keystone XL pipeline on their property even though the controversial project has yet to receive federal approval.

    Randy Thompson, a cattle buyer in Nebraska, was informed that if he did not grant pipeline access to 80 of the 400 acres left to him by his mother along the Platte River, “Keystone will use eminent domain to acquire the easement.” Sue Kelso and her large extended family in Oklahoma were sued in the local district court by TransCanada, the pipeline company, after she and her siblings refused to allow the pipeline to cross their pasture.

    “Their land agent told us the very first day she met with us, you either take the money or they’re going to condemn the land,” Mrs. Kelso said. By its own count, the company currently has 34
    (Update: Now it is over 100) eminent domain actions against landowners in Texas and an additional 22 in South Dakota.
    Republican’s in DC are just fine with this?

    http://www.nytimes.com/2011/10/18/us/transcanada-in-eminent-domain-fight-over-pipeline.html?pagewanted=all&_r=0

    Typically a pipeline company will reach an individual agreement with a landowner on compensation, but in the event of a failure to reach an agreement, pipeline companies in Texas at times use eminent domain to “condem” the land needed for their pipeline.

    The Keystone XL pipeline has brought the issues of EMINENT DOMAIN and landowner rights in Texas into the spotlight. Some landowners have refused to sign agreements with the company, and in response the company behind the pipeline has filed claims of eminent domain. Over a hundred in Texas.

    Some landowners argue that they have no recourse when this happens. A county commissioners court can only assess the value of the land to be condemned, not whether or not the company has a right to seize land in the first place.

    http://stateimpact.npr.org/texas/tag/eminent-domain/

    IF TRANSCANADA CAN DO THIS, SO CAN EVERY MIDDLE EASTERN NATION.

    “There’s very few jobs operating pipelines,” said Ian Goodman, president of the Goodman Group Ltd., an energy and economic consulting firm in Berkeley, Calif. “That’s one of the reasons why pipelines are attractive to the oil industry. They’re relatively inexpensive to build and operate.”

    rockinhits.com

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