Obama’s inaction leads to worse oil alternative
This past week, plans were announced to build an oil pipeline of massive scale that would connect Alberta’s energy-rich oil sands to the Canadian Atlantic coast just northeast of Maine. This pipeline is in response to a frustrating lack of a decision from President Obama regarding the proposed Keystone XL pipeline that would take the same oil through the United States to Louisiana and Kentucky refineries. The new pipeline, called Energy East, is more than twice as long as Keystone, carries a third more oil, and is a great example of how the desires of the market always come to fruition, regardless of legal impediments.
Obama hasn’t made a decision on Keystone because he’s been battling environmental criticisms from the left, while also facing flak from the right about letting those concerns prevent Keystone’s construction and all the jobs that it would create. Additionally, Keystone supporters tout that having a consistent source of energy from our friendly northern neighbor would reduce America’s energy dependence on the increasingly unstable Middle East. As a result of these competing concerns, Obama has deferred making a decision on Keystone for six years while oil demand, especially from the emerging markets of India and China, continues to skyrocket.
Oil companies aren’t going to forgo a significant market opportunity because of political challenges and, as a result, we now have Energy East, which is worse for the environment and creates a number of Canadian jobs, but no American jobs. In essence, Obama’s indecision has created a situation that is, by all measures, much worse than if Keystone XL was approved.
This type of situation is inevitable if politicians attempt to thwart significant market demand. Another example is the current state of the drug market in the United States. Because drugs are illegal, drug users are pushed into increasingly dangerous situations. Often, they don’t get the drugs they want and experience adverse effects. Cartels in Mexico have created significant challenges for the Mexican government and raised a multitude of humanitarian issues for the United States with the recent immigration crisis. If drugs were legal, these problems would disappear.
Another well-publicized example happened in Ireland, when the Irish government attempted to reduce the amount of trash that Irish citizens generated by making people pay a tax on collection of more than two bags of trash. Instead of curbing their consumption, the Irish simply started burning their trash, which was worse for the environment and led to a lot of fire-related deaths and accidents. The environment was worse off, and Irish hospitals were overwhelmed with burn victims, which increased healthcare costs, and diverted medical resources away from people with other problems.
Instead of trying to alter the most convenient way for market demand to be met, countries looking to generate positive outcomes from this market demand should seek to work within the system, rather than thwart it altogether. If drugs were legal but heavily regulated, not only could drug users get safe drugs, but organizations like Narcotics Anonymous could find a way to reach drug users and guide them out of addiction. Instead of penalizing trash creation, rewarding recycling has been much more fruitful for countries looking to promote sustainability.
With this oil pipeline, a similar tactic should be implemented. Oil is already very heavily regulated and taxed. Maybe Keystone XL should be approved, but an additional tax could be levied on the associated oil refineries and the money could be used to purchase carbon offsets to assuage environmental concerns. That’s just one idea, and it’s definitely not perfect, but that outcome would be far more desirable to all parties than the Energy East solution. The road to hell is paved with good intentions, so it’s better to work within the system than against it.