Libyan conflict increases US dependence on Canada's oil

The Libyan conflict increases America's attention on "the potential for Albertan oil," Deborah Jaremko, editor-in-chief of the Oilsands Review said today. The oil sands produce over $1.5 million barrels a day right now, she said,  and people are paying more attention to Albertan oil,  because it’s in a more stable regime than the Middle East, Jaremko said.

 President Obama praised Canada as a "stable and steady" source of oil last Wednesday. And at a U.S. goverment hearing entitled "Rising Oil Prices and Hostile Regimes: The Urgent Case for Canadian Oil", Republican lawmakers called for President Obama's quick approval of the Keystone XL Pipeline. This is a controversial project that would bring crude oil from Albertan oilsands to US refineries and further down to the Gulf Coast, if approved by the U.S.

The pipeline, approved by Canada in 2007, has attracted heavy opposition south of the border due to what critics say wil be environmental damage and public health risks posed by its construction. The pipeline will cut across the Ogallala Aquifer in the Midwest, which provides drinking water for two million people in the US. Because of  environmental damage caused by oil sand development, groups such as Friends of the Earth andGreenpeace have dubbed the oil coming from Alberta as "the world's dirtiest oil."

"Certainly, there are environmental costs associated with oil sands production," Andrew Leach, a business professor at the University of Calgary, said.  Leach  blogs extensively about oil, climate change and the oil sands. "But you put into perspective the political instability some of the other reserves, and it makes Alberta look much more important. We’re looking at sustained triple digit oil prices. That's going to put a lot of pressure on Alberta in terms of development." 

 Alberta's oil has increased because "Canada's oil is a safe, secure supply," Jay O'Neill, communications director of Alberta's Ministry of Energy, said.  "President Obama  said he would be cutting back dependence on foreign oil, but not oil from Canada."  Canada's Energy Minister, Ron Liepert, recently commented that "Middle East turmoil has got a lot of people thinking about where their oil supply comes from," said this reflected well on Albertan oil sands. 

Albertan oil is very different from the oil coming from some politically unstable oil-producing countries, Jeremko said. Albertan oilsands produce bitumen, a heavy crude oil which is much cheaper than light, clear crude from places like Libya. Despite this difference, Jaremko notes that US refineries on the Gulf Coast are configured to refine heavy crude, and that decline in oil from other countries have put Alberta in a favorable position with the U.S. 

"Alberta wants to get that Keystone Pipeline expansion near the Gulf Coast, where Canadian crude currently doesn't access. Crude from Mexico, especially, has been declining, so there's capacity for Canadian crude in the market right now," she explained. Partially because of heightened US demand, Jaremko sees the pipeline as a done deal. "I don't want to speculate," she said, "but I would be very surprised if the pipeline is not approved -- it's in the final stages of approval." 

Greenpeace energy and climate campaigner Keith Stewart, however, isn't convinced that the pipeline is inevitable.  

"This pipeline won't be here for another ten years," he said. "If you're looking at those kinds of time frames, there are much better solutions (than the pipeline) to meet the energy demands. And all of energy projections from Exxon shows that oil demand will go down in the next 10 years." 

"I've heard that this is a 'done deal' for about six months now," he said. "It's not as easy as a few Republicans come out for this to happen. The US system grinds slowly. We'll be using every opportunity to make our case. Any honest assessment about alternatives would find that we don't need this pipeline."