The argument is familiar to just about every American by now: The United States needs to import more Canadian crude oil to secure its energy independence, and building the proposed Keystone XL import pipeline is critical to accomplishing that goal.
Within the U.S. oil industry, however, the hot topic these days is not the nation's need to import Canadian oil—it's the possibility of exporting crude oil produced in the United States.
"A paradigm shift happens when reality smacks you upside the head, and reality is now smacking us upside the head," said Mark Mills , a senior fellow of the Manhattan Institute for Policy Research , a conservative, free-market think tank. "We're about to have a gusher of oil."
That expectation is causing the industry to make massive investments to reconfigure North America's pipeline network and change the way oil has been flowing for decades. "North America is in the process of being repiped," Al Monaco said  as he kicked off his tenure as the new CEO of pipeline operator Enbridge Inc . earlier this month.
The Canada-to-Texas Keystone XL is the most visible and highly charged part of that pipeline system restructuring, even though critics are now questioning the logic of building an import pipeline when the industry is increasingly focused on exports.
The industry's growing interest in exporting U.S. oil stems from a dramatic and unexpected surge in domestic light, sweet crude production that has boosted this country's oil production to more than 6.6 million  barrels per day, its highest level since 1995, according to federal data.
The flood of crude has caused a wholesale reversal of thinking within the industry, triggering predictions across the political spectrum that the United States could become not only energy self-sufficient but also a major oil exporter whose output could rival Saudi Arabia's.
Current U.S. oil output isn't nearly enough to satisfy domestic needs, but some of the newly accessible oil reserves still haven't been tapped. Already, the gush of home production has created an oversupply of light, sweet crude in the Midwest. Industry analysts expect rising production in Texas and North Dakota will create a similar surplus as early as next year in the Gulf Coast, where the nation's largest refineries are based—and where ports provide a launching point for overseas exports.
"What's obvious now is that the United States is on track to become the world's largest producer of oil," said Mills, author of a widely cited paper pushing for the export of U.S. oil and other fossil energy resources . "No one would have talked this way 10 years ago ... even three years ago they were wringing their hands because we were going to run out of the stuff."
The nation's unexpected petroleum boom has caught crude suppliers, traders and pipeline companies off guard. Limited pipeline capacity has caused oil supplies to build up in the Midwest, forcing oil producers from Colorado to North Dakota and Alberta, Canada to sell their crude at steep discounts.
This week, the price of North Dakota oil stood at about $75 per barrel , about 12 percent below the U.S. crude benchmark and more than 30 percent below the international crude benchmark. If that same oil reaches the U.S. coasts or global markets, it can fetch as much as $30 more per barrel. That's why some North Dakota producers are loading their oil onto rail cars, river barges and trucks for the long trip to coastal refineries.
New pipelines are even more essential for the Canadian oil sands producers. The value of their crude sank to the equivalent of less than $60 a barrel this week , well below the U.S. and international benchmark prices of $85 per barrel and $108 per barrel , respectively. They see the Canada-to-Texas Keystone XL pipeline system as essential to helping them close that gap. Getting their heavy crude to Gulf Coast refineries, or to world markets through the Gulf ports, could boost the value of their crude by as much as $48 per barrel.
Refineries are already taking advantage of higher international prices for gasoline, diesel and other oil byproducts. They've been exporting ever-increasing amounts of fuel, a trend that has made the nation a net exporter of refined products for the first time since at least 1949, the last year for which that data are available.
The same forces have led to record exports of U.S. coal, and now have many energy companies poised to send liquefied domestic natural gas to overseas customers as well.
But exporting crude oil is a different story. While there are no restrictions on exporting fuel produced by U.S. refineries, the same is not true for raw domestic crude oil.
To export U.S. crude, sellers have to contend with a patchwork of overlapping restrictions that makes it illegal to export U.S. crude to any foreign country without government permission and special licenses.
In the past, only a trickle of U.S. crude flowed out of the country through these licenses. But that's changing. In July, producers exported 77,000 barrels per day of U.S. oil to Canada —the highest level in more than a decade, according to federal statistics. Royal Dutch Shell, BP, oil trader Vitol and three other companies have applied for or received the necessary government clearance to export domestic crude oil—mainly, if not exclusively, to Canada—according to recent news reports .
Now the industry has begun to tip-toe into the politically sensitive issue of removing the export barriers.
"The reason for the [oil] export controls—short supply in the U.S.—is becoming somewhat of an anachronism, as the situation now being faced is of abundant supply," Citigroup Inc. oil analysts wrote in a March report that suggested North America could become "the new Middle East ."
"I'm not sure we should just automatically assume [exporting oil] would be bad," said Sieminski , a former Deutsch Bank economist. "It might actually be a way to grow the economy, create jobs and ultimately help reduce prices."
The industry is framing the notion of exporting domestic oil as a necessity created by a mismatch between the type of oil U.S. refineries are set up to refine and the type of crude oil flowing from North Dakota and South Texas. Because many Gulf Coast refiners upgraded their plants specifically to handle the cheaper heavy crude from Canada, the industry argues that light, sweet U.S. crude may need to be exported.
Conversely, if Gulf Coast refiners decide to buy more domestic crude from resurgent U.S. producers, then Canadian heavy oil delivered by the Keystone XL would be exported—a scenario some believe is more likely given the export restrictions on U.S. crude.
"There are likely to be economic incentives to export both Canadian and U.S.-based crude," the Citigroup report said. "Canadian crude should be the first to be exported from the U.S. to earn higher [profits] elsewhere."
Keystone XL: Needed for Energy Security?
Talk of oil exports and oil surpluses might come as a shock to Americans who still believe what they've been told for decades: that the nation is running out of oil and that we're importing too much oil from the politically volatile Middle East, which in turn makes the country more vulnerable to supply disruptions and price spikes.
In reality, however, oil prices are determined by the world market and problems or worries involving Middle East oil push up the cost of all crude, no matter where it comes from or where it goes. Physical supply disruptions—whether caused by international conflict, pipeline ruptures, or hurricanes—also trigger oil price spikes (as well as big increases in retail prices for gasoline and diesel).
What's more, the nation's dependence on foreign petroleum imports, now at 45 percent of consumption, has been declining since 2005, according to Energy Information Administration data compiled by the Congressional Research Service . Crude oil imports from the Persian Gulf, despite a recent uptick, are down 30 percent from the peak in 2001 . Soaring U.S. production is expected to accelerate those trends.
Still, the Keystone XL pipeline continues to be portrayed as a matter of energy security, a persuasive argument that opinion polls show resonates with voters.
Presidential candidate Mitt Romney makes the energy security argument nearly every time he talks about energy. So do representatives with the oil industry. An executive with TransCanada Corp. , the company behind the Canada-to-Texas pipeline, put it this way  in a Congressional hearing in December: "Keystone will bring many benefits to the United States, but I believe the most important role that Keystone will play is to bring energy security to the United States during what has been recently some very unsettling times overseas."
That assertion has overshadowed concerns raised by environmentalists, landowners and others who oppose the project. Those worries range from water pollution problems and greenhouse gas emissions in the Canadian oil sands to the perpetuation of the nation's reliance on oil, the seizure of U.S. landowners' property by foreign companies, and the potential for spills and leaks in streams and rivers along the pipeline route.
The notion that the Keystone XL is needed for U.S. energy security persists even as a succession of experts acknowledge that the pipeline's primary target market—the Gulf Coast refining hub—is already well-supplied and will reach glut levels as more U.S. oil flows to the region.
"If the public realizes that [the Gulf Coast refiners] don't need the Keystone XL ... I think it would have a huge impact on support for the project," said Anthony Swift, an attorney at the National Resources Defense Council , which has campaigned against the pipeline for years.
The Keystone XL system was originally intended to run 1,700 miles from Canada's oil sands patch in Alberta to refineries in Texas. But the project needs a permit from the U.S. State Department because it crosses an international border. Early this year President Obama postponed his decision on that permit, saying further environmental review was needed—especially for the section that passes through the Ogallala aquifer in Nebraska, a key source of drinking and irrigation water.
Most of pipeline's 830,000-barrel-a-day capacity would be reserved for diluted bitumen (dilbit), a blend of heavy tar sands bitumen diluted with liquid chemicals. In June, a series of reports by InsideClimate News  showed that after a 2010 dilbit spill in Michigan's Kalamazoo River, the liquid chemicals began evaporating and the bitumen began sinking to the river's bottom. More than two years later, oil is still pooling in the river . The EPA recently informed Enbridge that the most expensive inland pipeline spill in U.S. history—costing more than $800 million at last count—is still far from over.
To keep the Keystone XL project moving, TransCanada split it into two parts. While the company awaits permits for the northern leg, construction has already started on the southern section, which runs from Cushing, Okla. to Texas and doesn't need State Department approval.
Romney has repeatedly pledged to approve the northern segment "on day one" of his presidency if he wins the election, arguing that the project would create jobs and increase the nation's energy independence. Obama hasn't said whether he plans to approve the northern route.
Why the Oil Equation Changed
The dramatic turnaround in U.S. oil production began with the twin technological breakthroughs of horizontal drilling and large-scale use of a controversial process called hydraulic fracturing, or fracking, which together have made it possible for oil companies to tease "tight oil" out from dense shale rock formations. Such unconventional oil formations are what's fueling the boom in North Dakota and Texas.
Oil production in North Dakota jumped to more than 700,000 barrels per day  in August, more than triple its 2009 output , according to state reports. The Eagle Ford area in South Texas is still ramping up, but oil output there is already catching up to production in North Dakota. Tight oil production has already surpassed 900,000 barrels per day, and it's on pace to reach 1.2 million barrels per day by 2020, equal to 18 percent of total U.S. oil production, according to EIA estimates .
"U.S. oil production is up 25 percent since we last had a presidential campaign," said Daniel Yergin , author of The Prize, an acclaimed history of oil, and The Quest, a new book about energy. "In 2008, everything was really dominated by this notion of scarcity and peak oil."
With the rise of unconventional oil, or 'tight' oil, "there's this sense that our resources are more abundant," Yergin said in an interview. "The share of dependence on the Middle East oil will be lower than was anticipated."
The rebounding production is just part of the nation's new oil equation, however. U.S. fuel consumption has fallen off sharply in recent years because of the combination of a slumping economy, more biofuels use, more efficient vehicles and a shift in driving habits and demographics. While demand may recover somewhat when economic activity picks up, experts say the other factors will keep U.S. oil use on the decline.
Keystone XL supporters say neither the domestic oil boom nor the drop in fuel use negate the need for the pipeline and its cargo of Canadian heavy crude.
"We are still the largest oil consuming nation on the face of the earth. The more oil we can bring from Canada, in general, will displace oil coming from Saudi Arabia, from Nigeria ... that's better for us," said Fadel Gheit , a senior analyst covering the oil industry for Oppenheimer & Co. "Basically, we reduce our dependence on imported oil."
Indeed, the United States is currently a net importer to the tune of 8 million barrels per day of petroleum, driven mostly by demand from the nation's fleet of cars, trucks, trains and planes. That puts the United States a long way from becoming self-sufficient, and further still from becoming a major oil exporter.
And nothing is certain in the world of oil. Politics, environmental concerns, industry accidents, world events, cost and price changes, economic trends, geologic surprises and a slew of other factors could suddenly rearrange oil markets again—and scuttle the export ambitions of North American oil producers.
"Things could change, and very quickly," Gheit said.
Oil economist and consultant Philip Verleger Jr.  said the Keystone XL will be a victim of that rapid change. Verleger is a visiting fellow at the Peterson Institute of International Economics whose opposition to the Keystone project has rankled the industry.
The pipeline was planned when America's oil demand showed no sign of letting up and its production seemed in permanent decline. Now the pipeline's builder, TransCanada, and the Canadian crude producers who plan to use the pipeline face an economic double-whammy: U.S. demand is declining and U.S.-produced oil is flooding their target market with competing oil .
"The people who are saying we really need this [Keystone XL pipeline] don't recognize that circumstances have changed," said Verleger, who recently predicted that America will begin exporting more energy than it imports  within the decade.
"The Keystone XL is going to be just like an Egyptian pyramid. Useless."