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Is There a “War on Oil?”

shutterstock_123207982This article was originally posted in the Western Interior Oil & Gas Report magazine.

The “War on Coal” is alive and well under President Obama’s administration. In early June, the Environmental Protection Agency (EPA) announced a 30 percent reduction to the carbon pollution levels emitted by the country’s power plants by 2030. With nearly 1,000 power plants in the United States, intense regulations could cripple many of the nation’s biggest energy producers. Those in the industry are clearly nervous about the ramifications of this rule, especially when it comes to job security.

How does this relate to the oil industry? Since approximately 37% of the United States’ total annual energy consumption is supplied by petroleum (the leading source, by far), it resonates soundly. Fracking and horizontal drilling allowed the U.S. crude oil output to peak in May at a 28 year high, but not everyone is convinced that fossil fuels are economically viable. And most are doing everything in their power to stop their continued use.

The Plight of Keystone XL

The Keystone XL pipeline is poised to bring crude oil from Hardisty, Alberta to Steele City, Nebraska, then down to oil refineries on the U.S. Gulf Coast. Since the project was proposed in 2008, the Canadian government has been lobbying Washington each year for approval of it. Seeing that it would cross an international border, TransCanada, the company in charge of the project, needs a presidential permit. A decision on the pipeline, last delayed in mid-April by the State Department, still has not been made and likely won’t be made under the current administration. Which raises the question, why? The department claimed in a January report that the pipeline would not worsen carbon pollution. However, they admit they won’t move forward with a decision until after a pipeline-siting lawsuit in Nebraska is rectified, which they appear to be putting off until late 2015, conveniently after the fall elections.

Railcar Safety

Railcars deliver oil through residential areas within the United States. Their safety is constantly questioned however, especially after the derailments and explosions in Casselton, North Dakota and Lac-Mégantic, Quebec. Newly proposed rules include speed limits through urban areas, thickening of the tanks’ walls, pressure relief valves, and complete phasing out of old cars altogether. It’s important to note that both of these recent tragedies were not caused by railcars or oil. In North Dakota, the explosion was the result of a grain-hauling train that had slipped off the tracks and blocked a neighboring section of the railway. In Lac-Mégantic, an unattended train rolled downhill for 6.8 miles at highway speeds, exploding in the small town after sparks flew from the wheels.

Bottom Line

While oil is, and always will be, an easy target for environmentalists, it’s also a very practical and economical commodity. Drilling for, and production of, oil would not be growing at such an amazing rate were it not for its demand. Case in point is the graph below from the EIA.

eia-oil

Despite needing constant and updated regulations on railcar safety and ensuring Keystone XL’s safety if it’s built, it’s naïve to think oil is going away anytime soon. And despite constant negative press about oil and its drawbacks, everyone uses it in some form or another. Whether it’s deodorant, antiseptics, umbrellas, lipstick, shampoo, toothpaste, or a myriad of other things, oil is engrained in our daily lives and existence.

Until renewable energy technologies become reliable (if they become reliable), oil and other fossil fuels are the only choice. Instead of condemning the industry, we should be embracing it and working to improve it, instead of trying to shut it down.

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