Publications: The Petroleum Economics Monthly

Keystone XL Pipeline as Trojan Horse: A Gift from OPEC that Will Keep on Giving? (August 2011)

The title of this issue of The Petroleum Economics Monthly poses a very simple question: “Will the Keystone pipeline expansion be a Trojan Horse?” To be more specific, the report asks whether the proposed Keystone XL pipeline will be a Trojan Horse given to the United States and Canada by world oil exporters, particularly those in the Middle East.

Our report answers the Trojan Horse question in the affirmative and explains why. Specifically we assert that the Keystone pipeline—and other pipelines that may be built from Alberta to the US Gulf—will significantly lower crude prices in the United States and Canada compared to prices prevailing on world markets. Producers in Texas, Louisiana, the US Gulf, and other parts of the United States may see discounts to world prices rise to $30 per barrel. The reduced prices will constrain exploration and development and slow expansion of North American output, thus increasing dependence on imported oil.

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