An Early Start to the Keystone XL Pipeline, in Hopes of an Obama Defeat

Canadian company Transcanada Corp. has announced that it will begin early construction of the southern leg of the Keystone XL pipeline -- the leg from Oklahoma to the Gulf of Mexico. This section of pipeline is the most critical leg in terms of global oil markets, since it will help to reduce the gap between the WTI oil price and the Brent price.

Image Credit: The Atlantic

Unlike the northern portion of the pipeline, the lower section won't require approval from the State Department, since it doesn't cross any international borders. So it doesn't appear there's much environmentalists can do to halt it.

Although Transcanada -- not to mention the Canadian government -- would surely love to see the entire, 1,600-mile Keystone XL pipeline built out eventually, constructing its southern link is by far the most pressing piece of business for oil companies. In the long term, Canada wants to make sure there's a reliable way to ship its crude oil as production in Alberta's tar sands ramps up. For now, it's oil companies would be happy if just a bit more of their product could make it to a refinery. During the past few years, the surge of both Canadian and U.S. oil production has overwhelmed the pipelines leading from Cushing to the Gulf, which has created a giant glut oil sitting in the heart of the country. As a result, prices have fallen well below oil drilled elsewhere in the world. That's been a boon for nearby refineries and motorists in state like Colorado. But it's an obviously frustrating situation for the drillers.

Creating a new pipeline from Canada to Oklahoma obviously won't alleviate that backup. But when the southern portion of Keystone XL is finished in 2013, it's expected to move about 700,000 barrels a day, which would go a long way towards a solution.... _Atlantic

Certainly the defeat of US president Obama in the ballot box in November would be a boost for energy producers across North America -- from oil to gas to nuclear to coal -- and a huge boost for the US private sector economy.

Another boost for world oil markets, would be the removal of Venezuelan president Hugo Chavez, and a return to a more rational control of Venezuelan oil. Oil production in Venezuela has fallen under the bulbous bombast, and the oil sector is by no means the limit to Chavez' incompetence. He is much like the US' Obama in that regard.

Since Chavez came to power in 1999, he has wasted oil revenue buying votes and supporting countries such as Syria and Cuba. His decision to take 300 private companies into public ownership - many without compensation - has scared investors away.

The oil industry has been hit hard by Chavez’s policies. Not only did he reverse plans to let the private sector have a greater role, he raised production taxes and fired a large number of oil workers for political reasons – starving the state oil company of talent.

The 'Chavez effect' on oil production is easy to demonstrate: in 1998, when the price of crude oil hit a low of under $11 a barrel, Venezuela produced 3,167,000 barrels of crude oil a day. Twelve years later, despite record prices, output was only 2,090,000 barrels a day – nearly a third lower. _Moneyweek

We can all hope for the removal of both Obama and Chavez in 2012, for the sake of the world economy and world energy supplies.

One of the most serious oversights of peak oil lifers, is their lack of awareness that several nations have the capacity to increase oil production by at least 1 million bpd over current production levels, if they are willing to divert funds from political cronies and social welfare programs for purposes of upgrading and maintaining oil production equipment. Venezuela is merely one of these countries. I will leave it as an exercise for you to name at least two others which fall in this category. It isn't hard to do.

Here is an Australian look at the death of peak oil