As President Joe Biden takes in the latest rejection by OPEC countries to increase production to help ease American pump prices, U.S. lawmakers are again condemning his cancellation of the Keystone XL Pipeline from Alberta.  

On Oct. 5, the oil cartel led by Saudi Arabia announced its largest cut since before the COVID pandemic, a two million barrel per day reduction starting in November.  

While the actual cut is expected to be closer to 1 million barrels per day, the Biden administration is reportedly “panicking” as reduced OPEC production could cause U.S. gas prices to spike before critical mid-term elections in November.  

Senators and House Representatives are pointing out that Keystone XL would have carried 830,000 barrels of oil per day from Western Canada to U.S. refineries — had Biden not canceled the project on his first day in office. 

Here’s what they had to say:  

Senator John Kennedy, LA (R): 

Pres. Biden killed the Keystone XL Pipeline, which would have moved roughly 800,000 barrels of oil per day by 2023. 

Biden cut Americans off from affordable energy, and Louisianians are literally paying the price. But I won’t stop fighting his green-at-any-cost agenda. 

 Senator Ted Cruz, TX (R):  

Biden blames gas stations for high prices but just a reminder he killed oil and gas leasing on federal lands and waters, he killed the Keystone XL pipeline, and has drained the Strategic Petroleum Reserve to its lowest level since 1984 (among many other terrible decisions).

Senator Marsha Blackburn, TN (R): 

Joe Biden made a decision. 

He declared war on American energy. 

He canceled the Keystone Pipeline. 

He issued over 42 regulations to make American energy more expensive 

Now, Americans are being forced to live with the consequences. 

Senator Tim Scott, SC (R):  

Republicans have warned against the threat of relying on bad actors for our energy supply. 

But President Biden blocked our oil and gas resources here at home starting on Day 1, when he canceled the Keystone XL Pipeline. 

Senator Jerry Moran, KS (R): 

President Biden must reverse course and approve new drilling permits in the United States and strengthen our energy infrastructure, like the Keystone XL Pipeline. By using an all-of-the-above energy strategy to produce oil and natural gas, as well as renewable energy like biofuels, wind and solar, the United States has the ability to not only be energy independent but also supply energy to our allies around the globe.  

Rep. Brian Babin, TX (R): 

Reminder that the Keystone XL pipeline would be pumping 830,000 barrels of oil per day to U.S. refineries had Biden not shut it down. 

The Democrats’ war on oil and gas is hurting our nation AND our allies. 

Rep. Lauren Boebert, CO (R):  

Just imagine how much better off we’d be if Biden had not cancelled the Keystone XL Pipeline. #DrillBabyDrill 

Rep. Lance Gooden, TX (R):
Joe Biden is calling on gas stations to lower prices. Gas stations weren’t the ones who shut down the Keystone XL pipeline. 

Rep. Mary Miller, IL (R):  

 Mr. Biden’s anti-energy agenda has caused the price of a gallon of gas to skyrocket to the highest average price of gasoline and diesel ever recorded. In my home state of Illinois, these prices were even higher than the national average. Instead of making it easier for American companies to increase domestic oil and gas production and hire more U.S. workers, Mr. Biden has shut down the Keystone XL Pipeline and begged OPEC and Russia to increase global output to ease rising prices. 

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Saudi Arabia has reminded us again of the power of the world’s largest oil producer. Through Saudi Aramco, one country with only 35 million people controls 11 per cent of global supply.  

Saudi Arabia can influence global oil prices simply by adjusting output. It has demonstrated this many times. The Saudis also control OPEC, but don’t advertise it. 

In 1973, OPEC cut back production to punish western interference in Middle East politics. This oil embargo and subsequent price spike plunged the world into an economic recession that lasted more than a decade. 

When oil prices fall too far, the Saudis cap the downside by reducing output. This supports other producers and has helped maintain multiple and diverse oil supplies.  

Oil is critical to the Saudi economy. The Saudis would like to sell as much oil as can be produced sustainably at a fair price as long as possible.  

A price too low hurts their economy. 

A price too high hurts customers and the long-term market. 

However, the price that is “just right” remains impossible because of geopolitics and macroeconomics.  

On October 4, Aramco CEO Amin Nasser publicly expressed deep concern about current oil markets in a world that has been determined to impair the continued development of the same resource that society cannot survive without. 

Nasser said, “If China were to open up a little we will find our (spare) capacity eroded completely…the world should be worried because this is no cover for any recovery or any unforeseen interruption anywhere in the world.” 

Another example is air travel returning to pre-COVID levels, which would increase demand by 1.7 million barrels per day. 

Aramco has long warned that underinvestment would cause supply shortages and economic disruption. But discouraging the development of new production is what the western world has wanted because of concerns about climate and decarbonization. 

After the COVID-19 pandemic lockdowns of early 2020, oil demand and prices collapsed. OPEC morphed into OPEC+ by cooperating with Russia to control output. When OPEC+ shut in 10 million barrels a day, it stabilized prices and protected producers in Canada, the U.S. and around the world from financial collapse.  

At that time having Saudi Arabia and Russia – hardly beacons of democracy or human rights – in control of 20 per cent of the world’s oil supply didn’t seem to bother anybody. 

After all, fossil fuels were a sunset industry. 

In early 2021, Joe Biden was sworn in as U.S. president. So began contradictory and unpredictable changes in U.S. energy policy that now reinforce Aramco’s warning.  

Because nobody knows what the White House will do next.  

First Biden cancelled the Keystone XL pipeline, which helped cap growth in Canada’s massive oil sands resource. This was part of the anti-fossil fuel platform that helped the Democrats win the 2020 election. 

But as oil prices began rising in mid-2021, Biden looked offshore for more oil to keep U.S. prices down. At a G20 meeting in November on his way to the COP26 climate conference in Glasgow, Biden called on Saudi Arabia to increase output. 

This was an odd favor to ask from a U.S. president who, while on the campaign trail a year earlier, had called Saudi Arabia a “pariah state.” 

Then the White House extended an olive branch to Iran, currently under siege internally and externally for its oppressive treatment of women. The U.S. would remove its economic sanctions obstructing Iranian oil exports if that country would recommit to restricting its nuclear development activities. 

This disappointed the Saudis which have been engaged in a political and religious power struggle with Iran in the Persian Gulf for decades. 

Then Russia invaded Ukraine in February, becoming the first major oil producer to start a war in Europe. In response, the U.S. has punished Russia in every way except committing American troops and aircraft. America has supplied weapons and money, introduced economic sanctions on Russia, and is leading a G7 attempt to cap Russian oil prices to further starve Russia for cash. 

To lower gasoline prices before the November mid-elections, Washington decided to compete with OPEC+ and U.S. producers by releasing one million barrels per day from America’s Strategic Petroleum Reserve.  

This has suppressed prices and sent the wrong signal to producers, which would ramp up spending if prices kept rising. The U.S. rig count declined slightly in September after rising steadily for two years.  

Monetary policy to tame inflation has caused the U.S. dollar to strengthen, thus reducing headline oil prices. Uncertainly about a recession’s impact on oil demand has also capped prices.  

On October 5 OPEC+ expressed its displeasure with the all the foregoing by cutting output by 2 million barrels per day. Saudi Arabia chose to side with new “pariah state” Russia, instead of its former ally America, a relationship that dates back to WWII. 

With U.S. mid-term elections looming, this is a political stick in the eye to the Biden administration.  

As producers develop their 2023 budgets, no big capital increases are planned. Why? Because the mixed messages have created tremendous uncertainty. 

Those that should be drilling will be very cautious until Washington and Ottawa signal they want more petroleum, not more politics. Western companies don’t, and will never, take direction from OPEC+.  

The world should be worried. Higher oil prices are assured. 

David Yager is an oilfield service executive, oil and gas writer, and energy policy analyst. He is author of  From Miracle to Menace – Alberta, A Carbon Story.  

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The tables have turned in the largest refining market in the U.S., with oil imports from OPEC countries like Saudi Arabia and Iraq taking a dramatic drop in the last five years.   

That’s thanks to increased imports from Canada, even without the Keystone XL pipeline that would have provided a direct connection from Alberta to refineries on the U.S. Gulf Coast. Producers and refiners are finding smaller, less direct routes including rail to connect supply with consumer demand. And there is significant room to grow.  

“Canadian heavy oil is now the single biggest foreign contingent of crude that’s run in the Gulf Coast,” said Jeff Kralowetz, vice-president of London, UK-headquartered consultancy Argus Media, during a recent webinar about pricing for Western Canadian Select (WCS) crude oil. 

“Western Canadian Select, which is a blend of crudes out of western Canada, has become really the benchmark for heavy crude in the western hemisphere,” he said. 

“Its production recovered to pre-COVID levels faster than the U.S. Permian [Basin] did. And it’s now about 3.7 million barrels a day coming out of Western Canada. And about 75 per cent of that is the type of heavy crudes that go into the blend for WCS that comes to the U.S.” 

Canada is now by far the largest oil supplier to the U.S., sending about 3.8 million barrels per day in 2021 or about 62 per cent of total oil imports, according to the U.S. Energy Information Administration (EIA). 

Nearly half of U.S. refining capacity is in the Gulf Coast region, in states including Texas and Louisiana.  

As recently as 2018, about 50 per cent of the oil imported into the U.S. Gulf Coast came from OPEC, compared to just 18 per cent from Canada, according to the EIA.  

That has shifted dramatically. In 2021, Canada met 33 per cent of U.S. Gulf Coast oil imports while OPEC declined to just 15 per cent.  

Imports to the region from Canada have been going up while OPEC has gone down for almost a decade. In 2012, 63 per cent of oil imports came from OPEC, and Canada just 3 per cent. By 2019 imports were about even – at 26 per cent from Canada and 25 per cent from OPEC.  

New pipeline infrastructure like the completion of the Line 3 Replacement Project in October 2021 helps connect Canada’s oil producers with demand from U.S. refiners, Kralowetz said. Infrastructure like Keystone XL would help even more. 

Even with more renewable energy coming online, the EIA projects that U.S. petroleum demand will continue rising in the coming decades, reaching nearly 19 million barrels per day in 2050 compared to 17 million barrels per day in 2021.   

“Sometimes our solutions are right in our backyard,” Alaska Sen. Lisa Murkowski (R) said during a May 2022 meeting of the U.S. Senate Energy and Natural Resources Committee.  

“Look to your neighbours first.” 

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