So pipelines and tankers have become critical lifelines for an industry that has shaped not only the Texas Gulf Coast but America’s entire oil-based economy.
Enter the Keystone XL pipeline. TransCanada, a Calgary-based pipeline giant, hopes that its Keystone XL project will take Canadian tar sands oil on a 1,700-mile journey from a tank farm in Alberta, across the Great Plains and down the spine of America, and deliver it here.
The refineries are eagerly waiting. The modernized Valero refinery can turn 310,000 barrels a day of some of the world’s worst-quality crude oil — such as the bitumen-laden mixture from Canadian oil sands — into gasoline and diesel fuel for cars and trucks. Valero, the largest U.S. oil refining company, would be one of the biggest customers of oil from the Keystone XL pipeline, buying about 150,000 barrels a day.
What happens to the Canadian oil once it arrives in this port is central to the debate over the need to build the Keystone XL. Foes of the pipeline worry that the oil will be exported, either as crude or as refined petroleum products such as diesel or gasoline. As a result, they argue, the United States would get little benefit in return for accepting the risk of a pipeline leak. Rep. Edward J. Markey (D-Mass.) has proposed barring exports of petroleum products made from Keystone XL oil.
Pipeline proponents say it would add to U.S. supplies and reduce dependence on unfriendly governments such as Venezuela’s or unstable regions such as the Persian Gulf. They say bringing additional crude oil onto world markets will also damp prices, which surged again this summer. Even if a portion of the oil products made from Canadian crude is exported, proponents say, that would still ease world prices while sustaining U.S. refining industry jobs.
“Valero has no intention of exporting the crude oil that comes down the Keystone XL pipeline,” said Bill Day, a Valero spokesman. “As for exporting refined products, that is an increasingly important part of Valero’s business, but that’s already happening without Keystone XL and will continue regardless.”
Exports are also a long-standing part of the global trade in refined oil products. American motorists tend to use a lot of gasoline, and not so much diesel. In Europe, it’s the reverse. So American refiners ship diesel to Europe and import gasoline from there. In addition, Mexico and many countries in Latin America lack advanced refineries, and they, too, turn to the U.S. Gulf for supplies.
“Some products get exported, but most stay in the U.S. for domestic use,” Day said. “In the first quarter of 2012, Valero exported less than 18.7 percent of the distillates it produced and less than 6.7 percent of the gasoline it produced.”