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Special Energy Report / WHITE HOUSE

Obama Kicks Off 'All of the Above' Tour

photo of Amy Harder
March 21, 2012

President Obama starts a four-state tour on Wednesday to highlight the administration’s “all of the above” strategy for meeting the nation’s energy needs.

Stops will include a solar-power plant in Nevada, oil and gas fields in New Mexico, an oil-transport crossroads in Oklahoma, and an advanced energy research center in Ohio.

The centerpiece of Obama’s two-day trek will come on Thursday in Cushing, Okla., site of the world’s largest oil-storage facility and a nerve center for the thousands of miles of pipelines that carry oil across the country.

 

The Cushing visit will enable the president to push back on an issue that Republicans have been hammering him on in the campaign, his rejection of the Keystone XL pipeline. And it will give him some refuge from the raging storm over high gasoline prices by allowing him to focus on something even his opponents agree about: the need to improve the nation’s pipeline infrastructure.

Cushing is to be the southern starting point of the controversial Keystone pipeline, a 1,700-mile project planned to carry oil from Canada’s tar sands to U.S. refineries on the Gulf Coast. Obama rejected a permit for the entire pipeline in January, but announced last month that the administration fully supports construction of the southern portion to help ease a chokepoint for oil at the storage center in Cushing. Currently there is not enough pipeline capacity to move oil from Cushing to refineries in Texas and Louisiana, where increased production of gasoline could help reduce the upward pressure on prices.

The president has taken a lot of heat for holding up the full Keystone project, but his energy speeches in recent months have repeatedly mentioned pipeline improvements, something the GOP, the oil industry, and even many environmentalists agree are necessary.

“We’ve approved dozens of new pipelines to move oil around, including from Canada,” Obama said at Nashua Community College in New Hampshire earlier this month.

Pipelines are considered the safest, cheapest, and most efficient way to transport oil. The oil industry depends on a network of 168,000 miles of pipeline throughout the country to ship more than two-thirds of all the oil and petroleum products transported each year, according to the Association of Oil Pipe Lines. Environmentalists don’t love pipelines, but they prefer them over other modes of transporting oil that are more prone to spills, including trucks and trains.

But pipelines have a convoluted effect on the regional disparity in gasoline prices—so convoluted that Obama will probably gloss over the particulars on Thursday. Such nuanced facts are extraneous; his speech is mostly a campaign-messaging opportunity designed to address voters’ disgruntlement with high fuel costs.

The important thing is that pipelines are tangentially related to gasoline prices and critical to the country’s energy supply. Cushing gives Obama a compelling political pulpit (more impressive than a college campus) to talk energy and assure voters that he’s worried about how pain at the pump is hurting them—not to mention his fight to keep the White House. The average price per gallon of gasoline nationwide was $3.84 this week, up 30 cents from a month ago, according to AAA.

“We’ll do whatever we can to help speed the construction of a pipeline in Oklahoma that will relieve a bottleneck for oil that needs to get to the Gulf,” Obama said in New Hampshire. “And that’s going to help create jobs and encourage production.”

The southern part of the Keystone XL pipeline will be able to transport 700,000 barrels of oil a day once it begins operating, likely late next year. The lag time means the bottleneck of oil in Oklahoma and other parts of the country won’t be relieved anytime in at least the next year, which means Obama won’t see much relief on gasoline prices, at least from that project, before the November election.

As long as a glut of oil exists in the middle of the country, crude oil will continue to be sold to refineries at lower prices in the Midwest and Mountain West states than on the Gulf Coast. Of those two regions, the Mountain West has had significantly lower gas prices than other regions since the beginning of the year, according to recent Energy Information Administration numbers. Gas prices in the Midwest remain relatively high, however.

But one thing is clear: Any change (up or down) in gas prices won’t be attributed to the glut as long as that glut remains relatively constant, which experts agree will be the case until at least next year. This makes pipelines a safe political focal point for Obama.

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