Russia's brazen move into Ukraine has triggered a reaction from supporters of America's oil and natural gas industries. To diminish Vladimir Putin's clout in Europe and pressure him on Ukraine, they want the Obama administration to fast track a host of U.S. energy industry priorities. By doing so, they say, the United States can increase fuel supplies to Ukraine and much of Europe, which depend heavily on Russian oil and natural gas.
The industries' priorities include quickly approving more facilities to export liquefied natural gas, removing restrictions on domestic crude oil exports, and approving the controversial Keystone XL pipeline that would carry Canadian crude oil to the Gulf Coast.
Energy—and especially oil—has a long history of being at the forefront of foreign policy and territorial conflict. But in this case, many analysts question whether the energy industry's wish list of policy actions would have a timely and meaningful impact on Russia, Europe or the situation in Ukraine.
The most curious item on the list is the Keystone XL pipeline.
TransCanada's long-delayed oil pipeline would carry heavy oil from Alberta's tar sands south to refineries on the Texas Gulf Coast. Part of the pipeline is already in service, but the portion that runs from the U.S.-Canada border through Nebraska can't be built without a federal permit indicating that the project is in the national interest.
How does such a pipeline have any bearing on a dispute involving Russia and the Ukraine?
So far, the pipeline's supporters have cited two main reasons: It would send a "signal" to Russia that would convince Putin to stop using energy as leverage, and it would cause U.S. refiners to stop buying Venezuelan heavy crude, which would inflict economic pain on a Russian ally.
Here's a quick look at those arguments.
Approving the Keystone XL pipeline sends a warning signal to Russia and Putin.
This contention is the most widely cited reason for linking the pipeline to Russia's move into Ukraine.
James L. Jones, a retired U.S. Marine Corps general and former national security adviser to President Obama, told a senate committee in March that the Keystone is "a litmus test of whether America is serious about national, regional and global energy security…and the international bullies who wish to use energy scarcity as a weapon against us all are watching intently." Then he added: "If we want to make Putin's day and strengthen his hand, we should reject the Keystone." Jones is now affiliated with a pro-Keystone, oil and gas advocacy initiative by the U.S. Chamber of Commerce.
A columnist for Forbes went so far as to suggest that the pipeline's opponents are inadvertent "proponents of Russian President Vladimir Putin's grandiose vision of reunifying the former Soviet Union." The author, Carrie Sheffield, said the Keystone XL protesters were helping keep the global price of oil higher, and helping Putin in the process.
Rep. Paul Ryan, R-Wisc., told CNN that approving the pipeline is one of several steps the United States should take in response to Russia's aggression.
"It's a signal," Ryan said of the Keystone. "The signal is that America is open for energy business. America is going to be helping our allies with energy resources so that they can be less dependent on Russian energy resources."
The problem with this theory is that the world—including Putin—already knows that the United States is open for energy business. The United States is the world's largest producer of natural gas and is on the verge of taking the top spot in oil production. U.S. oil and gas imports have fallen dramatically as a result, freeing those shipments to go elsewhere, including Europe.
Even if the pipeline were approved, it would be a couple years before it could start carrying oil. And even then the 830,000 barrels per day it could carry would be a small ripple in a world that consumes 92 million barrels per day. Another flaw in this theory: current law prohibits European countries from processing oil sands crude and accepting its byproducts.
The biggest fallacy of all is the suggestion that the United States can wield its energy resources as foreign policy weapons.
Putin and many other nations can do it because the energy companies are owned or controlled by the government. That is not the case in the United States.
Neither the president nor Congress can tell the owners of U.S. liquefied natural gas plants where to ship their LNG. Companies can't be forced to deliver their product to Europe or Ukraine instead of to Asia, where they can make substantially more money, based on current pricing.
The federal government can't tell Gulf Coast refiners to buy oil from "friendly" nations or to only sell gasoline and diesel to certain countries to further U.S. political interests. Lawmakers can't block companies from continuing to export propane, gasoline, diesel, or natural gas when U.S. stockpiles are low and local prices are soaring.
In short, the only energy supplies at the U.S. government's disposal are the Strategic Petroleum Reserve, the Northeast's heating oil reserve, and whatever it has purchased through the military or other federal agencies.
What that means is that if the Keystone pipeline is built, what happens next will be based on economics, not what's best for U.S. foreign policy or U.S. consumers.
Refiners could sell much of the resulting gasoline and diesel overseas to the highest bidder. Or refiners might buy the Canadian crude and export it instead of processing it themselves. Or oil traders could buy and sell it.
Approving the Keystone would give Gulf Coast refiners the heavy oil they prefer, therefore displacing crude oil imports from Venezuela, a Russian ally.
Keystone pipeline supporters have long argued that importing Canadian heavy crude would displace oil imports from unfriendly countries such as Venezuela. What's new this time around is the emphasis on Venezuela's connection to Russia and Putin.
Diane Francis, a commentator and author, put it bluntly in a recent opinion piece for the New York Post. In the wake of Putin's move in Ukraine, she wrote, America and Canada "must gear up for battle by deploying oil and natural-gas weaponry."
"The most immediate retaliatory blow would be the approval of Keystone XL from Canada," Francis added. "This oil pipeline would add 830,000 barrels a day into the U.S. oil market, more than enough to replace the 755,000 barrels a day of oil imports from Russia's western hemispheric ally Venezuela."
Approving the Keystone pipeline—a move Francis referred to as delivering a "Keystone bomb"—would punish anti-American Venezuela as well as Russia, she said. Under her scenario, the delivery of added Canadian heavy crude would force more Venezuelan oil onto the international market, where the extra supplies would lower world prices and, by extension, lower oil revenue for both Venezuela and Russia.
But Venezuela is already feeling the pain of lost oil sales to the United States. Venezuelan energy sales to America may soon hit a 28-year low, partly because refiners are buying heavy crude from elsewhere, including from Canada via rail, barge and other pipelines.
Also, Gulf Coast refiners don't buy oil based on U.S. political interests. They decide which oil to buy based almost exclusively on its price and the profitability of the products that can be made from it. There are other factors, too, but they are minor in comparison.
Since the prices for all varieties of crude oil are in constant flux, there's no guarantee that the Canadian heavy crude that will flow through the Keystone will always be the best buy. When it's more profitable to buy Venezuelan oil, refiners will buy it.
In addition, two of the Gulf Coast refineries are owned by Citgo, which is a subsidiary of state-run Petroleos de Venezuela. So it's a good bet that Citgo won't be crossing Venezuela off its supplier list any time soon.
Michael Bradshaw, a professor of global energy at the England's Warwick Business School, said he doesn't see how Russia would benefit if the Keystone XL were rejected. He doesn't see how Russia would be hurt by its approval, either.
"I don't see the link," he said. "It's simply a desperate plea by the yes camp to get the pipeline approved."