The Keystone XL pipeline, if built, would cause gas prices in the Kansas City area and the rest of the Midwest to rise by as much as 40 cents per gallon, according to a report being released Tuesdayday by a consumer group.
Consumer Watchdog, a California group that has released numerous reports over the years about the petroleum industry, claims the pipeline will restrict oil supplies in the U.S. as exporting to other countries picks up.
The result: rising oil prices with the ripple effect extending to gas and diesel prices.
Many pipeline supports have claimed the controversial project, which would tap the large oil reserves in Canada’s tar sand formations, would be good for the country and consumers.
The Midwest has been awash in crude oil from North Dakota and Canada but that would change when the pipeline makes it easier to reach other markets including the Gulf Coast where the commodity could be used in refineries located there or shipped to other countries.
“It (the Midwest) is going to be the most vulnerable region,” said Judy Dugan, research director emeritus for Consumer Watchdog who helped write the report titled “Oil Industry Cash Machine.”
The Obama administration is still considering whether to approve the pipeline, which is heavily supported by industry groups such as the American Petroleum Institute.
But other groups have opposed it over concerns about the pipeline’s effect on the environment, and have been skeptical about the possible benefits.
Trains have started to transport more of the Canadian oil to markets outside of the Midwest but the oil is still largely constricted to the region where it has sold for discounted prices in the last few years. Refineries in the region have generally plowed the savings into their own profits instead of lowering gas prices.
The end of those oil discounts, which would happen if Keystone is built, would still have an impact on Midwestern motorists, the report said. The region’s refineries would be reluctant to relinquish their high profit margins and the Midwest could see shortages., according to the study. Keystone would allow the oil to bypass the Midwest and increase gas prices from 20 to 40 cents per gallon, the report concludes.
The study refers to a statement from consultants for TransCanada, which would be the pipeline’s owner. The company said Canadian oil prices would go up if the pipeline is built and would climb further if it caused a reduction in the available supply in the Midwest.
“They clearly believe the Midwest is oversupplied,” said Dugan.