The Keystone XL pipeline decision. Crony Capitalism at work.

 

The President has decided to delay the permission to build the Keystone XL pipeline until after the 2012 election, thus satisfying the environmentalists that want to wean us off our dependency on carbon based products, such as fuel and fertilizer. The arguments for delaying the decision are nearly exclusively political, while the arguments to build the pipeline are concerns for our national security and economy.

Here is the deal:

Canada has the tar-sands and is extracting the oil. This was not our decision. If we don’t buy the oil, China will.

We are importing crude oil from the Middle East, Nigeria, Venezuela and other volatile places, leaving us exposed to supply and price disruptions.

We export refined products to the Caribbean islands, which by the way have a larger carbon footprint per person than the U.S. This is good business, since the islands are too small for a refinery.

It takes more energy to run a refinery up north in a cold climate than in hot, humid Baytown, Texas.

The last time a major oil refinery was built in the U.S was 1976. A small refinery was built in 1993, in Valdez, Alaska. The  US. regulatory climate is hostile to refineries. Colombia, O.K, US. No.

It costs about $5 per barrel to ship oil through a pipeline from Canada to Texas, nearly all of it capital costs. It costs about $15 per barrel to ship it via railway; much of it is energy cost.

Warren Buffet’s bought Burlington Northern Santa Fe railroad in February 2010 and paid 44 Billion dollars for it. The railroad paid Berkshire Hathaway 2.25 Billion in dividends during the first 13 months. Warren Buffet bought the railroad after Obama took office.

This railroad can handle all the oil shipped from Canada to Huston during the next decade, even longer with expansion. It is therefore in Buffet’s interest not to build the pipeline.

Warren Buffet is a major player in the Obama Administration; he has frequent access to the White House and is a major contributor to Obama’s campaign.

Sarah Palin succinctly coined the phrase: “This is Crony Capitalism.”

Published by

lenbilen

Engineer, graduated from Chalmers Technical University a long time ago with a degree in Technical Physics. Career in Aerospace, Analytical Chemistry, and chip manufacturing. Presently adjunct faculty at PSU, teaching one course in Computer Engineering, the Capstone Course.

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