The Future of US Liquid Fuels is Canada

The article from earlier this week in the WSJ is interesting because it indicates the direction that the US is taking to handle its future needs for energy fuels (gasoline and diesel). Below are a few excerpts, but the entire article is worth a read.

The future of the U.S. oil industry arrived last year in Cushing, Okla., moving along at two miles an hour.

It was the first crude from the Albertan oil sands to reach as far south as the giant Cushing pipeline hub, one of the locations where global oil prices are set. To get there, the crude traveled through a pipeline that for decades carried oil in the opposite direction.

A month later, a second pipeline was reversed and Canadian crude reached all the way down to southeast Texas, the world's largest cluster of petrochemical plants and refineries and the traditional front door for much of the U.S.'s oil supplies.

The pipelines . . . . represents resent long-term, multibillion-dollar investments in infrastructure to enable Canadian crude to keep cars running on U.S. roads. But the shift requires billions of dollars in investment and could clash long term with efforts to curb global warming, and still won't be enough to quench the thirst for oil in the U.S., which consumes roughly one out of every four of the more than 80 million barrels produced daily around the world.

Currently, the U.S. pipeline grid is set up to import oil into the Gulf Coast. Some of that oil is sent north by pipeline or barge to refineries in the country's Midwest region. But global supplies are increasingly unreliable, . . . . Canada is a reliable exporter, free from the political turmoil that racks much of the oil-producing world.

"It's a big expansion of Canadian supplies into the U.S.," says Shirley J. Neff, president of the Association of Oil Pipe Lines. "There is no way a pipeline company will make an investment if it doesn't see a long-term supply source and a market that needs to be served over the long term." . . .

Producers are very interested in capturing more U.S. markets for Canadian crude. Although exact figures aren't compiled, the amount being spent on Canadian oil-sands development, new pipelines to bring the crude to the U.S. and to retrofit refineries is expected to top $15 billion a year through the middle of the next decade. This easily exceeds the amount being spent to build the U.S. ethanol industry, according to London-based consultant New Energy Finance.

"The people who understand the industry the best understand that long term the most substantive solution is in the oil sands," says Charles Swanson, managing partner in the Houston office of Ernst & Young. "The fundamental economics are stronger than the stuff we hear about today that is trendy and sexy," he says, referring to ethanol and other biofuels.