On Keystone and Fracking: What's Powering the New Year

They got what they asked for

2014 wrapped up with generally bad news for the oil and gas industry. The Keystone XL pipeline across the US-Canada border remains a pipedream, oil prices have dropped and New York officially banned fracking within the state. Let’s take a look at each of these issues and see how things may play out in 2015.

First up: fracking. To the cheers of “fracktivists,” NY Governor Andrew Cuomo banned fracking in the state in late 2014. The governor cited the state health commissioner’s health study that found that the process poses “significant public health risks.” So “fractivists” and other environmental advocates can focus on other states with an unlikely source of leverage: Low oil and gas prices.

Oil prices have dropped precipitously since last summer. There are a number of reasons for this, but it’s been driven primarily from increased production out of the US, sustained output from OPEC and weak demand in Europe and Asia. This trend has and will continue to hurt countries like Russia and Venezuela that rely on high oil prices to make their budgets. Some fracking companies and other producers of unconventional fossil fuels need higher oil prices to earn their margins, so they will have to come up with cheaper, more efficient methods of production or we may see a tapering of drilling this year.

Finally, if you’ve been paying attention to the news, the Keystone XL pipeline is at the top of the agenda for the Republicans who now control both houses of congress. Despite the hype, some see the pipeline projects as an overstated symbol without any real impact outside of politics. And low oil prices have shed light on how Keystone XL’s significance may be more about American politics and US-Canada relations than about climate change and the economy. Still, it’s important to note that Keystone XL would move some of the world's dirtiest oil from under Canada's Boreal forests to the Gulf Coast, carrying with it risks of future oil spills that may mirror the past. 350.org also argues that potentially carrying “800,000 barrels per day of tar sands oil across the United States” is probably not a good thing for the climate. Groups like NRDC are also pointing out that the ‘job creation’ argument for the pipeline actually only creates 35 permanent US jobs. So low oil prices and potentially high environmental risks may make the anticipated Keystone XL veto a no-brainer for the Obama administration.

The low price of oil will deter expensive unconventional oil production, make it easier for government officials to say ‘no’ to further expanding energy production and even may present an opportunity to increase the tax on gasoline. But unless something happens to raise the price of oil and gas this year, look for the conversation around energy, climate and how to address environmental issues to continue to shift in the future. Historically, environmental and social costs have not been covered by what we pay at the pump or on our utility bills. However unlikely it may seem, low oil and gas prices may allow us to finally get talking about how we can cover all of the costs.


Image “CREDO Action & New Yorkers Against Fracking Protest Gov. Cuomo's Plan to Frack New York” by CREDO: Cuomo Policy Summit 8/22/2012 on Flickr used under a Creative Commons Attribution-2.0 Generic license.