02.22.2013 17

Keystone pipeline is the key to the future

Source: State.gov

By Bill Wilson — Everything we will ever need to know about the Obama Administration may come down to a single decision. And that is whether Obama, along with newly sworn in Secretary of State John Kerry, approve the Keystone XL pipeline from the Alberta tar sands to the U.S.

For, contained in that decision is not just the future energy independence of North America — the U.S. currently depends on foreign sources for 45 percent of our fuel — but perhaps the future prosperity of the American economy.

If completed, the expanded pipeline — there actually is another Keystone pipeline from Alberta  operated by TransCanada that already delivers about 590,000 barrels of oil a day — will add another 500,000 barrels a day to the mix.

The fact the Chinese are waiting in the wings to claim this energy for themselves would be reason enough to approve it. Beijing has offered to pay for building an alternative pipeline to the Pacific coast to have  the oil shipped there.

For now, global production keeps up with global demand, but developing economies like China and India — oil importers both — invariably are leading to higher demand.

Which means every drop we fail to develop here, whether in the deep waters of the Gulf of Mexico, or fail to gain access to, as in Canada, is driving up prices at the pump.

The recent run-up in gasoline prices provides yet another warning to the Obama Administration of the types of price pressures the American people will be faced with in the future should we fail to become energy independent. Since Jan. alone, the price for a gallon of regular gasoline has jumped by $.44 to $3.69 on Feb. 18, reports the Energy Information Agency.

But even all of that pales in comparison to the growing danger posed to the petrodollar and more generally, the U.S. dollar’s status as the world’s reserve currency — that makes Obama’s opposition to Keystone all the more inexplicable.

As part of the resolution to the 1973 oil shock, the petrodollar was born when Richard Nixon convinced Saudi Arabia to only accept dollars for payment of oil in return for protecting their oil fields and a guaranteed return on investments in U.S. treasuries.

It was a move that cemented the dollar as the world’s reserve currency, since ample dollars were needed  by all oil-importing nations in order to transact in the most essential of commodities in the global economy.

But since that time, the U.S. has not been a responsible steward of the reserve currency, racking up more than $16.58 trillion in debt with artificially low interest rates that seemingly get lower by the year, offering little return on investment for foreign creditors. Right now, some $5.5 trillion of debt is held overseas.

However, the single largest holder of U.S. debt is not a nation or a Wall Street investment house. It is the Federal Reserve, the nation’s central bank, which holds $1.6 trillion, and government agencies, which hold another $4.8 trillion. At $6.5 trillion, that means the government holds about 40 percent of its own debt.

Classical economist Adam Smith warned that such a policy — printing money to pay the debt — was “a real public bankruptcy [that] has been disguised under the appearance of a pretended payment.”

Even if the Saudis continue to agree to denominate oil in dollars and to ignore our obvious insolvency — other nations are not. Russia, Iran, and Venezuela all have taken serious steps to obliterate the petrodollar, first by accepting payment in other currencies. China and India, as customers, are aiding this process along.

These steps make perfect sense, if one anticipates a collapse of the dollar, to already have built a financial system that is capable of delivering energy even without dollars to transact with. And the more these alternative modes of payment are utilized, the weaker the dollar becomes.

The Achilles’ heel may be the House of Saud itself. A WikiLeaks an official U.S. diplomatic cable released in 2011 found that Saudi Arabia may be overstating its oil reserves — said to total from 716 billion to 900 billion barrels — by as much as 40 percent.

Sadad al-Husseini, a geologist and former head of exploration at the Saudi oil monopoly Aramco, was cited in the cable as disagreeing with the official estimates, and that “[i]n his view once 50 percent of original proven reserves has been reached … a steady output in decline will ensue and no amount of effort will be able to stop it. He believes that what will result is a plateau in total output that will last approximately 15 years followed by decreasing output.”

If true, that would mean the Saudis on their own could not perpetuate the petrodollar regime if they wanted to — and that the system might collapse sooner than anyone thinks.

Which brings us back to the Keystone XL pipeline.   If the demand for dollars to buy oil is reduced, then the very foundation of our financial system is put in jeopardy.  Our saving grace is to generate as much oil, natural gas and coal as we can and sell it for dollars, thus maintain the need for other nations to get and keep dollars.

Our salvation includes developing North American energy resources, like deepwater drilling in the Gulf of Mexico, like the Bakken shale oil, and like making certain the Alberta oil sands flow via the pipeline to here and not to Beijing.

It also includes dismantling the out-of-control Environmental Protection Agency (EPA). The agency is regulating carbon emissions and stormwater without any guidance in the law. It is ruining the nation’s coal industry. It is engaged in a sue-and-settle racket with radical environmentalist groups to expand its powers via judicial fiat. And its regulations threaten America’s future ability to develop and utilize natural resources.

Developing energy here and removing regulatory impediments alone will not obviate our financial problems, which are profound, but they can at least keep provide a foundation for future economic growth.  Improved economic prospects will boost our ability to service the national debt without relying on petrodollars or outright monetization. It will reduce inflation and the cost of doing business here in the U.S.

Cheap fuel will pave the way for expanded manufacturing capacity here, creating millions of jobs.

If, however, the Obama Administration rejects Keystone XL, and if it turns its EPA loose on shale oil producers in North Dakota, Pennsylvania, and elsewhere as it has on coal producers — it will have put America on a dangerous path toward a dark and weakened future.

And it will have done so knowing the consequences. Knowing the dollar’s reserve currency status was threatened. Knowing the oil would wind up overseas anyway or just remain in the ground. And worst of all, doing this while knowing that everything depended on taking a different path.

Yes, we’ll know just about everything we need to know about the Obama Administration based on its Keystone XL decision — and its continued war on energy, growth and prosperity via the EPA.

Bill Wilson is the President of Americans for Limited Government.

  • Johnnyonthespot

    Canada should not sell the tar sands.

  • EddieW

    The sad thing is this hege pipe they are laying has alread proven to have huge cracks in it, but they simply bury it…HUGE enviromental damage, plus permanent damage to water supply will result…It will require billions of tax dollars to fix, but one can’t clean up the underground oil filled water supply! So..many people die, and everyone is happy!! This outfit has a horrible record on enviromental damage!!

  • EddieW

    Right on and we should not buy them!! Plus the pipeline has already proven to have huge cracks in it, and they simply bury it and will not weld the cracks shut!! Guaranteed enviromental damage that can never be cleaned up, especially when it reaches the underground water supply!!

  • jwatersphd

    Bill, your dedication to oil and coal company profits at any cost is still alive and well. I have not heard ANYONE connected to this deal claim, with a straight face, that it will do anything for our energy dependence or that burning this type of fossil fuel is environmentally sound, compared to even other fossil sources such as natural gas. You’ve had plenty of outrageous things to say, such as that mercury is not a pollutant, and, i think that CO2 isn’t, either, so, despite all the appearances that you’re engaging in learned, informed discourse most people who’ve kept track of you ought to be able to spot this as just another of your Chamber of Commerce advertisements masquerading as a call for “liberty” and “freedom,” which only means liberty and freedom to make a profit without any regard for the consequences to other people and the society.

  • Obama will mess this up just like he messes everything else up.

  • bob570

    As long as Obama’s good buddy Buffett’s Rail Road, the BNSF, keeps making the money it is, hauling the Oil south, there will be no Pipe Line. Regardless how much more the shipping costs. While regardless how high price of Gasoline goes, new, and old refineries will continue having to deal with ever more costly, and punitive regulation from the EPA.

  • pduffy

    The blog said, ” At $6.5 trillion, that means the government holds about 40 percent of its own debt.”
    Hmmm… How do you pay back a loan made to yourself? Can you take money out of your own bank account and deposit it back into your own account with interest? Where do you get this money to repay yourself? Get the picture? They spent the money that was sent to ‘Social Security’, and promised to repay it with more taxes from the same people they taxed in the first place. It’s an impossible repayment, and is an accounting trick designed to fool the sheeple that the fund still exists – when it does not. They stole the money folks, and there is nothing to be repaid.

  • Where did you see this information about the cracks. Last year they put down gas pipelines near us and I talked with some of the workers when they were not on the job. They said they used extreme caution in making sure the pipes and everything connected to them was up past what would be safe.
    Are you sure of the validity of your source or were they perhaps a left winged environmental looney you are quoting from.

  • If we don’t get the pipeline, other countries, perhaps China wile get this oil. All the environmental problems are at the site and whether we or another country get it it will be the same. The kinks have been worked out about where the pipeline goes. It will be to our advantage in our economy and jobs and help us get out from under the thumbs of the country’s that don’t really don’t like us. And for that matter we need to gather our natural resources and used them like natural gas. It is insane stupidity for us not too. It just gripes me that this country caters to the nuts and not to those with the common sense.

  • reggiec

    Sources please! That is actual hard evidence, not some liberal rhetoric.
    For instance I could claim that so called man made global warming is preventing the next ice age but would be unable to prove it because of a couple of little things called entropy and chaos theory. The same things that prevent anyone from claiming man is causing climate change. You might look up the definations of those terms along with Milankovitch cycles.
    The only reason modern society even exists is because of the energy supplied by fossil fuels. If you want to help conserve them go live naked in a cave but don’t expect much company.

  • Regardless of whether the pipelines are safe or not, there is irrefutable evidence that burning fossil fuels is damaging to our environment. For example, ten minutes of idling an automobile emits 1 pound of carbon dioxide into the environment. Oil or any other fossil fuel shouldn’t even be an option for our future economic development. And it doesn’t really matter where that oil is from — whether the Bakkan or Saudi Arabia — it’s all bad stuff when it’s burned. That being said it’s also not smart to hand our future to China on a silver platter. If we don’t pull it together to develop alternative, safe energy sources so we can get off the oil teat, we’re all screwed. We’ll suffocate in our own pollution. The Obama Administration has taken a shotgun approach to alt energy — giving grants and funds to every state university who decides to create an “institute” for solar, wind, alt energy. Certainly those universities benefit and he’s kept a lot of his supporters happy but the research hasn’t moved forward much at all. If we approached this like the Manhattan Project and put all of our best minds, the most productive researchers from both the private and public sectors on this project, we’d be done with it. We’d have a clean energy alternative. The safety of a pipeline wouldn’t even be a topic. We wouldn’t need it. I say use that Pipeline money for alternative energy research. And if we can’t do that then we should make a swift, clean switch to nuclear energy. Nuclear power is cleaner, on a day to day basis, than fossil fuels. Now don’t start fuming that I’m a bleeding heard liberal; I’ve been voting straight GOP ticket since I cast my first ballot a long time ago. I simply believe that thinking oil is our ticket to a healthy economy is not very farsighted.

  • madascanbe

    Yeah, Buffet’s in bed with Obama!

  • rfredtelles

    why would obama do anything to lower gas prices?

    obama has stated he thinks we need to pay more for gas

    to get us to look for alternative energy sources

    he wants gas prices so high we wont be able to drive
    which will also make all other prices go sky high

  • FloridaJim

    There is only one reason to deny America the abundance of our natural energy and that is to bow to people like Obama who are wanting to redistribute America’s wealth to “more deserving”countries. This has been an idea from 60’s radicals that America is a “bad” country that “stole” from the Indians, Mexico, and others and should give our wealth to others.The United Nations, George Soros and other very wealthy people like Al Gore are behind the scam with global warming being used as an anchor on which to support the scam. There is a movie “2016” which describes Obama’s plans to bankrupt America and the 60’s radicals worldwide are all in cahoots. Agenda 21 is another part of the overall plan, look it up. Russia,China, Canada and 100 other countries are mocking us for our stupidity. In a world where energy is king we foolishly bow to these people and allow Obama to destroy America and lie daily doing it. What is wrong with us?

  • WhiteFalcon

    The key to our future is getting rid of Ovomit and the commieonazicrats (democrats) that are in power now. It is them that are holding up our prosperity and our good fortune. They must be gone before things can get back to normal, otherwise we will just become a third world country.

  • manfromthemountain

    This is pure BS!! Do not believe the liberal media!!!

  • hankster6

    You are asking for two irrational people to start thinking rationally, good luck with that one!!! Obama is offer to approve the pipe line if he could get a carbon tax approved. I have no idea how must tax that would be or how it would even be determined, but, in my mind, just pass the tax. We are going to be taxed every way possible anyway, but, at least the pipeline would serve two purposes. More fuel for us and more jobs!!! We are going to be taxed until we can not afford to wear pants. Let get the pipeline going and worry about the tax when it comes along with the rest of them! What can we do with an irrational dork. The idiots of America and voter fraud allowed in to stay and now everyone must deal with that BIG mistake!!

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