Will Keystone hurt Alaska?

Here’s GOP Senator-elect Dan Sullivan on Greta Van Susteren, who asks an interesting question about whether or not Keystone Pipeline will lower the price of oil and cut into Alaska’s coffers:

Either this is a new idea for Sullivan, or he wasn’t prepared for the question. I remember asking Sen. Lisa Murkowski’s spokesperson a while back about how Keystone would affect Alaska, and the answer was along the lines of what’s good for the country is good for Alaska, which is a pretty good answer. But still, it might sting if and when that oil comes down Keystone. Even pre-Keystone, the price of oil is tumbling. On Thursday, crude oil traded for less than $75 a barrel for the first time in more than four years. And it looks like the tumble will continue given that Saudi Arabia, increasingly nervous about the shale oil boom in the U.S, is refusing to cut production. In other words, things aren’t looking good for Alaska.

This is from a comment by Lynn Willis on the subject:

We now face the impact of the Saudi’s purposeful suppression of oil prices in North America to make marginal oil prospects untenable as they did with Oil Shale in the 70s. And this move impacted just as Alaska is now depending on the extraction of more marginal oil reservoirs and we must now face the resulting reality that the producers and the state may well not have the available investment capital for projects such as a 65 billion dollar AKLNG project as envisioned in SB138. I am amazed that the first action our new Senatorial delegation wants to do is support the Keystone pipeline will might just lessen demand for Alaskan oil.


12 thoughts on “Will Keystone hurt Alaska?

  1. Amy Carroll

    To the many people at work and around town who have asked if the above comment is mine: NO. It’s someone else with the same name.

    Amy Carroll (from the Alaska Department of Fish and Game in Juneau Alaska)

  2. joe blow

    How about we let Sullivan get sworn in and actually serve in the office for a couple of days before we write him off?

  3. Garand Fellow

    I certainly have the fear that the promise of a gas line will be enough of an excuse to allow deficit state spending to continue until cash reserves, other than the corpus of the Permanent Fund, are spent. That ensures much more severe economic dislocation and a state and municipal government crisis. The calculus is that if we keep paying those agency people as much as a half-million dollars a year so that amount can be their PERS “high-three” they will keep telling us there will soon be a gas line bringing $3 billion or $4 billion in annual unrestricted revenue.

    There is absolutely nothing in energy markets today to suggest a gas line from the North Slope is even remotely feasible. Remember, the US was in an extreme energy crisis, with gasoline purchasers beating one another while waiting in line, when TAPS was approved yet it was approved in the US Senate by one vote. Does anyone see anything like that today?

  4. Garand Fellow

    If Democrats like Barack Hussein Obama, Harry Reid, Hillary Clinton, and Barbara Boxer weren’t always trying to confiscate my guns I would be less likely to go door to door for Dan Sullivan or anyone else. As it is, if Afghan Dan just stops Obama from making anti-gun court appointments then every dollar and every hour I spent will have been entirely worthwhile.

    If you think that universal background checks are not gun registration then you have never looked into California, Chicago, Australia, etc. etc. If you think that gun registration is not reliably followed by gun confiscation then you have not looked at NYC, Canada, Chicago, CT, etc. etc. If you think that gun confiscation is not sometimes followed by mass murders of innocent civilians – very often predominately women and children – then you have not studied 20th Century and 21st Century history at all.

  5. Crude is Rude - Gas is gold

    CRUDE behavior in public……..

    Alaska trying to persist on sucking more crude thru TAPS is like…
    a poor handicapped morbidly obese mentally challenged diabetic “retarded” kid in a wheelchair sucking on his empty milkshake straw…
    …going crosseyed and making loud annoying slurping sounds trying to inhale the last sweet drops of the same crap that made him fat in the first place.

    SLURRP!!! gurgle SLURRP!!! gurgle SLURRP!!! gurgle

    Mommy & Daddy try to get the kid to switch to iced-tea, following doctor’s orders…
    …but the kid throws a fit every time,
    screaming “I want more chocolate milkshake !!”

    SLURRP!!! gurgle SLURRP!!! gurgle SLURRP!!! gurgle
    SLURRP!!! gurgle SLURRP!!! gurgle SLURRP!!! gurgle

    If you dig into the WA-state tax records you will find that in 2010 BP was selling propane that originated from Alaska North Slope from the WA-state Cherry Point refinery for $1.21/gal.
    …but propane in many parts of Alaska costs $10/gallon.

    Alaska’s CRUDE behavior can be cured if we add HYDROGEN to all of the remaining crude while converting it to methane and light-alkanes…
    new technology makes this process very efficient.

    goog: horse manure crisis

    goog: siluria gasoline

    Gas is a superior feedstock compared to crude……..

    The best market for Alaska’s Gas is…….. ALASKA !!

  6. Brad Keithley

    While there was a potential Keystone would have an effect on oil price when first proposed (by bringing additional supplies onto the world market), we have long passed that point. The oil that Keystone proposes to ship largely has already found its way to (and thus had its impact on price on) the market through other (albeit more expensive) means. Now, by lowering transportation costs Keystone is much more about improving netbacks for Northern Tier and Canadian producers than anything else. I suppose improving netbacks may improve the economics of the odd marginal field, bringing on supply that otherwise might not have been developed, but I am not aware of any major projects that could even remotely affect price waiting on Keystone’s completion.

    As to Glen’s point about the duration of the price change, virtually none of those who study these things are talking about this being a temporary aberration. Wednesday, the EIA’s November outlook lowered the price forecast for calendar year 2015 to $83. And yesterday, London’s respected Capital Economics group (who was ahead of the curve in forecasting the current price fall), while forecasting $75 per barrel by the end of 2015 and $70 by the end of 2016, said this about where we oil markets may be headed: “Given the current negative sentiment in the market, it is clearly possible that $70 could be hit much sooner … we believe that lower oil prices are here to stay.”

    Rather than “hope” that the price adjustment is a temporary aberration — which some are using as an excuse to continue talking about maintaining state spending at unsustainable levels in an effort to squeeze out the last, few remaining drops of Alaska’s unrestricted savings before moving off to warmer climes — Alaskans are much better served by using their time coming to grips with the reality of what is happening around us. From a state revenue perspective, at even $85 (which now seems like a distant memory) the price drop is the functional equivalent of an overnight loss of 40% in TAPS remaining throughput. That calls for immediate action, not continued hand ringing about whether the situation “is real” while others continue to shovel the state’s remaining savings (which according to the most recent ISER numbers we are now burning through at the rate of $10 million per day) out the door.

  7. Anonymous

    Well, congratulations Alaska. We have sent another “government is the problem” politician to go work in the government for us. He seems like a nice enough guy, but I don’t really know what anybody sees in Dan Sullivan other than the fact that he wears a red jersey and is “anti-Obama”. I guess that’s enough for the majority. I expect his term as Senator will be fairly unremarkable, and he will pretty much tow the Republican line by catering to/advocating for moneyed interests while Alaska’s interests take a back seat to the preservation of wealth and power for the wealthy and powerful.

  8. Garand Fellow

    I’m not sure this is a meaningful discussion e.g. will an incremental efficiency in North American oil production impact Alaska? Look to the November 27 OPEC meeting first.

    TAPS would never be built today. It will operate as long as doing so is cost-effective.

  9. Amy Carroll

    This is interesting in light of the previous blog post, specifically referencing the Mead Treadwell press secretary. Amanda noted that the RNC stole him for doing too good a job when they wanted Sullivan to win.

    Well now we see what we got. Sullivan is constantly caught like a deer in the headlights when asked slightly novel questions about simple ideas. I know he is an educated person who served briefly as our Attorney General, but he never seems to understand anything about the state he claims to know and love.

  10. Lynn Willis

    As you know, in classic economic theory increasing supply of any commodity, from whatever source, will drive the price for that commodity lower.
    Already the BNSF Railway is moving North Dakota Oil to the West Coast in substantial volumes which lessens demand for Alaska’s oil at west coast refineries. Was that lack of demand on the west coast of the U.S. the reason we recently were allowed to export a shipment of Alaskan oil to a foreign market?
    Regarding the “hope” for increasing crude prices; that hope is a two edge sword because while increasing prices for crude oil provides additional Alaska state revenue those same rising crude prices also increase the cost of fuels for mobility and space heating for individual Alaskans. Also, have we Alaskans finally learned the lesson of basing state budgets on a “hope” of ever increasing oil prices over time?

  11. Glen Biegel

    The crude moving to Texas will keep alaska north slope crude higher in price, it seems to me. In other words, in the absense of keystone, the Canadian oil can come west by rail and compete with ans crude. The price may stay low for only a brief period as well.

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