Koch Brothers, Hugo Chavez and the XL Pipeline
Keystone XL will increase, not decrease, gas prices at the pump
This article originally appeared in Vice magazine
I’ve been tracking a tube of black putrid ooze, a toxic viper slowly slithering 2000 miles across the belly of America, swallowing all water aquifers, politicians and reason in its path.
The XL Keystone Pipeline.
As Nagini, the murderous snake in the Harry Potter tales, had its master Voldemort, I figured the Keystone XL Pipeline must also have its own dark lords.
And the Dark Lords of the Keystone XL left clear clues: environmental horror, political payouts and the odor of sulfur stronger than explained by the stinking hot tar inside it. I smelled Koch.
David and Charles Koch are each worth $20 billion--and they’re quite certain that’s not enough. And so they need the XL Keystone Pipeline.
The XL Keystone will take Canadian tar-sands oil, the filthiest crude on the planet and suck it down to Texas Gulf Coast refineries. Alberta’s oil-glop reserve, if it can get to the US market, will warm the planet by nearly .4°C all by itself.
Why in the world would America pistol-whip Mother Nature to bring oil to Texas? I mean, it’s just plain weird to suck heavy tar oil out of Canada, drag it across the entire middle of the USA to import it into the oil-exporting Lone Star State.
Here’s where a little lesson in oil chemistry comes in. You can’t just throw any old crude oil into an oil refinery. These giant filth factories are actually quite sensitive. The refineries of the Texas Gulf Coast are optimized for heavy crude.
It would cost billions of dollars to rebuild the giant Flint Hills Corpus Christi Refinery, owned by Koch Industries, to use the less-polluting Texas oil drilled nearby.
The Kochs need heavy crude. But the Brothers Koch have a problem. Heavy crude is controlled by a heavy dude – President Hugo Chavez of Venezuela.
In case you haven’t heard, the US Department of Energy now says Venezuela, not Saudi Arabia, has the world’s largest petroleum reserve--including the overwhelming majority of the planet’s heavy crude.
And Chavez is not giving it away. “We are no longer an oil colony, Mr. Palast,” Chavez told me in one of our meet-ups in Caracas.
He wasn’t kidding. Venezuela’s export price now averages around $100 a barrel.
So the Kochs have turned their gaze upward--to Canada, where Alberta oil men are selling their tar-sands gunk for a whopping $33 a barrel less Chavez Heavy. Do the math: With 289,000 barrels a day refined at Corpus Christi, switching to Canadian Tar from Venezuela Heavy could put $3 billion a year extra into the pockets of the Kochs.
However, there’s a problem. Between Canada and Houston is the United States. At the moment, there’s no pipeline that can take all that cheap crude south. The southbound pipeline network now chokes at Cushing, Oklahoma, which is already blocked with 47 million barrels of crude sitting in storage tanks with nowhere to go.
So, all the Kochs have to do is get the US government to agree to pop a pipe through Cushing to Houston—the Keystone XL. But that would require that the US government go stark raving mad, commit environmental suicide, reverse all policy to slow global warming -- all to bring in foreign oil while the US itself is suffering from a major oil and gas glut.
Furthermore, approving the Keystone XL Pipeline will raise the price of heating oil and gasoline in the US.
Let me repeat: Approving the Keystone XL Pipeline will raise the price of oil and gasoline.
This is the nasty little secret of the Pipeline lords and unknown to all but experts. Every Republican politician and not a few Democrats have promoted the fairy tale that the XL Pipeline will reduce gasoline and oil prices throughout the USA.
It’s bullshit, but it’s gospel—utterly unquestioned by the mainstream media. Even opponents of the pipeline buy the lower-cost-oil line, repeating variants of the New York Times editorial no economic “benefit from Keystone XL [will] outweigh the certain damages” to the environment.
But the “benefit” is bogus. Prices for gasoline will rise by about 15 cents a gallon in the Upper Midwest if the pipe opens.
Here’s why. Normally, the supply of crude oil in the US doesn’t have a damn thing to do with the price of gas you put in your Humvee. Normally, Canadians could hose us down with hot tar and it wouldn’t change oil and gas prices by a penny.
That’s because the international price of oil is not set by supply and demand in the marketplace. Rather, the price is fixed by a dictator in a bathrobe, Abdullah, King of Saudi Arabia. He dictates, you pay it.
But there are always anomalies.
As matters stand, with nowhere to dump their tar goo, Canadians have to sell at $33 a barrel discount to nearby refineries in the US Upper Midwest.
American consumers are getting the benefit of this oil back-up. Indeed, one angry Canuck, Cenovus Energy CEO Brian Ferguson, complains that the pipeline plug results in. "subsidization to the United States consumer by $1,200 per Canadian."
The XL Pipeline would act as an oil enema, releasing the impacted inventory, enriching the Gulf refineries.
The result of opening the spigot through the XL Keystone will mean that US Midwest retail heating oil prices will skyrocket and gasoline in the region, as the crude drains away to other refineries, will rise an estimated 15 cents a gallon.
True, cheaper crude oil will now flow south, but as Canadian economist Robyn Allan writes, “It's the refining sector that sees the benefit of lower priced WCS [West Canadian Sands oil] in the form of windfall profits from low feedstock costs.”
The gusher of cheap crude from a new pipeline will enrich the refiners … none more so than refiners named Koch.
But how will the Kochs get Obama and the US government to turn against US consumers and their own green policies and promises?
I’ve been tracking the Kochs for 18 years, first as a private investigator on a case of oil missing from an Indian reservation.
One thing from that case sticks with me even today. The trail of missing oil led to Charles Koch himself who (according to a secret recording), allegedly told a co-conspirator why he did it. The billionaire said,
“I want my fair share. And that’s ALL OF IT.”
And “all of it” now includes a pipeline filled with hot, cheap oil.
Next Week: More on the Chavez vs. Koch next week in Part 2. This week, readers of The Other 98% may download, without charge, the film, The Assassination of Hugo Chavez, based on Greg Palast’s investigations for BBC Television and The Guardian. More on the Brothers Koch in the New York Times bestseller, “Billionaires & Ballot Bandits: Greg Palast investigates Karl Rove, the Koch Gang and their Buck Buddies.”