It's Now The Biden XL -- January 23, 2021

This argument is a good example of folks talking past each other. This argument falls on deaf ears (those of environmentalists).

The argument above (in the black box) is true in the short-term. But the environmentalists have a strategic plan.

They will give let atmospheric CO2 rise in the short term to get to less CO2 in the long run.

They are moving step-wise from A to Z.

A: 100% coal

Z: 100% solar / wind

Steps along the way: make oil so expensive that people are forced to switch from ICEs to EVs.

By eliminating pipelines, it makes oil very, very expensive to ship.

But this is the problem. As oil becomes more expensive, transportation costs become less of an issue.

There's probably an ECON-101 graph that shows two lines: price of oil and cost of producing/bringing that oil to the consumer.

There are many components that determine the price of oil Transportation is just one of them. As long as the price of oil stays above the total cost of production/delivery, oil will still reach the consumer.

The anti-pipeline folks are hoping the lines cross, with the price of oil dropping below the cost to produce / deliver oil.

Interestingly enough, my hunch is it's still much "nicer" to produce and deliver oil by CBR from North Dakota than from places like Libya. Saudi Arabia et al can't survive on $50 oil.

So, at the end of the day, I don't see stopping pipelines a a viable solution for the environmentalists in their attempt to get from A -- 100% coal to Z -- 100% solar/wind.

Somewhere along the line, the environmentalists need to stop CBR. That's the next step. Stop the pipelines, then stop the trains. That I think is impossible. Oil is so much less hazardous than many other products shipped by rail, including radioactive waste.

Meanwhile, on the policy side, the environmentalists will mandate transition to EVs where they can -- at the federal level (military) and at the state level (California).

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The Canadian Perspective

The Globe and Mail is considered by many Canadians to be their "newspaper of record.

The Globe and Mail is reporting that "the Biden XL decision hurts, but it's not a surprise and it's not fatal to the oil patch.

U.S. President Joe Biden’s rejection of the Keystone XL pipeline is a blow to the psyche of Canada’s oil patch as it seeks to recover from last year’s oil-price crisis, but it is not a knockout punch.

The biggest surprise is how surprising this was to many Canadians given Mr. Biden’s long-stated opposition to the project. It is symbolic of his new administration’s emphasis on pulling the United States back into the global climate-change fight – regardless of the actual impact on emissions Keystone XL might have had.

The quest to build it is worthy of a Russian novel. It has been in the works for 13 years, facing regulatory reviews, federal and state legal challenges, demonstrations, rejection, approval and now rejection again. The company has for years touted its job-creating ability and relative safety in comparison with moving oil by rail.

But in that time the market evolved. The Canadian oil industry has gained other options for moving crude to its biggest customer and is also dealing with the growing realization that a transition from fossil fuels – gradual though it may be – is under way.

For me, the Biden XL has become a non-story. It encouraged US refiners to maintain legacy refineries optimized for heavier oils rather than move to new refineries optimized for lighter shale oils (the Permian and the Bakken). For me, the real issue has always been jobs. But as we've noted, joblessness is not a real issue for the political elite in Washington. Nor apparently is it for many voters. 

For the rails, it's a godsend. 

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If I Recall Correctly, The New Mexico Vote For Biden Was Huge

Meanwhile in New Mexico, Reuters is reporting that New Mexico Amerindians are seeking an exemption from Biden drilling pause. 

By the way, that's an incorrect headline: there is no drilling pause. There is a leasing pause. Quit with the "fake news" already.

Link to Reuters here. 

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Houston Pipeline Futures Soon To Launch?

Bloomberg is reporting that "pipeline Giants' Houston oil futures seen launching in months.

A new futures contract for the physical delivery of crude in the Houston area may only be a few months away from launching.

Enterprise Products Partners LP and Magellan Midstream Partners, the pipeline companies responsible for delivery of Houston’s two active futures contracts, said, they are joining forces to create a broader benchmark. That may happen in a few months, said Bruce Heine, a Magellan spokesman.

The Houston contracts reflect a shift in the oil industry’s focus from the storage hub in Cushing, Oklahoma, the delivery point for New York-traded futures, to the Gulf Coast. A global appetite for U.S. crudes resulted in a new web of pipelines and terminals to connect the Permian Basin of West Texas and New Mexico to the world.

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Not All That Big! LOL

Meanwhile it turns out that the one-billion-dollar-lottery winner this past week did not set a record. It's only the third largest in US history.