With the recent vote and debate about whether to proceed with building the Keystone XL pipeline, most arguments have focused on economic claims, in particular the pipeline’s impact on oil prices and jobs. Personally, my support for the pipeline has nothing to do with either of these things.
Instead it stems from the fact that, in a free society, based on private property and free exchange, land owners have a right to do whatever they want with their property, including run a pipeline across it.
In refusing to approve the pipeline, the government is denying people their rights. So ultimately to allow or not to allow the building of the Keystone XL pipeline is a moral question centered on the extent to which one believes in private property rights and individual liberty.
It so happens, though, that adhering to the principles of individual liberty that undergird the fundamental argument for going ahead with the pipeline will also mean more commerce and more production, which will, happily, be good for the economy.
In this regard, a recent post on Reason’s Hit & Run blog by Scott Shackford makes a couple of interesting points. The first one is fleshed out pretty well, and I will not dwell on it here.
This is the claim from some pipeline foes that most of the jobs that will be created are temporary. The point isn’t that this claim is false but that, as an argument that would advance the cause of the pipeline’s opponents, it is too true.
As Shackford notes, this is the case with all infrastructure projects. Most jobs are in construction, and once the bridge, road, railroad, etc., is built, the vast majority of the jobs go away. This is particularly true of the eco-left’s favorite infrastructure projects: wind and solar power plants. As Shackford points out:
There is now a talking point that KeystoneXL maybe isn’t so great because it actually doesn’t produce a bunch of jobs. The job numbers people are tossing about are only temporary. This is technically true, but the absurdity comes from these same folks pushing other infrastructure and energy projects that have the same fundamental “flaw” (scare quotes because it’s not a flaw). Most of the jobs touted by these projects are only temporary. Fixing roads and bridges, something Obama keeps hammering about? Those are all temporary jobs. The “homegrown energy” projects Obama mentions? Mostly temporary jobs!
Stackford’s second point probably needs a little more explanation than he provides. The real economic absurdity relates to the following statement from President Obama:
Understand what this project is: It is providing the ability of Canada to pump their oil, send it through our land [As far as I know Obama owns none of the land], down to the Gulf, where it will be sold everywhere else. It doesn’t have an impact on US gas prices. (Emphasis added.)
First, it should be noted that the land is not “our land.” It is primarily the land of private individuals who, as noted above, have a right to use it as they wish.
As for the claim that “it won’t have an impact on U.S. gas prices,” it is not clear whether the president is once again trying to “Gruber” the American people (“To ‘Gruber’ is to lie to someone because you think they’re too dumb to know any different.”) by taking advantage of what he perceives to be their ignorance of economics or if it is he who is ignorant. My suspicion is that it is the former. I do think Obama is a smart man and does understand the basic workings of supply and demand.
The idea that there will be no benefit to American consumers because the oil will be sold elsewhere is downright silly. Leaving aside the truthfulness of the claim that the oil and gasoline that is refined from it will not be sold in the U.S., the fact is that the prices of these products are largely set in world markets, no matter who they are sold to. Any increase in the supply of oil that enters market exchange anywhere will depress the price of oil everywhere.
If the oil from Canada is sold in the United States, it will mean that American refiners, who will be purchasing the oil, will have less demand for oil produced somewhere else, putting downward pressure on global oil prices. If the Canadian oil instead enters world markets, then the increased global supply will also put downward pressure on oil prices, redounding to the benefit of American consumers.
Of course, I believe the president knows this and, as he did when selling Obamacare, is trying to pull the wool over the eyes of an American public that is as much in favor of the pipeline as they were against the Affordable Care Act.
It should be noted that the president is right in one respect. There will probably be little difference in oil and gasoline prices if he allows the pipeline to be built, but the reason for that is quite different from the reason he gives.
The fact of the matter is that Canada is going to sell that oil no matter what. This means that the oil will still enter world markets, and American consumers will still benefit. The question is will American citizens enjoy the additional benefits of being part of the production and distribution process? If the pipeline is allowed, the answer will be yes. If it isn’t, the answer will be no.
Dr. Roy Cordato (@RoyCordato) is Vice President for Research and Resident Scholar at the John Locke Foundation.