Iraq conflict: Could it boost the Keystone XL pipeline bid?

The crumbling security situation in Iraq and concerns that Sunni extremists continue to gain power in the oil-rich country could strengthen the argument that the U.S. should be turning more to Canada for its oil needs.

Oil production in Iraq is unaffected so far, but instability could raise the issue of oil supply security

The recent conflict in Iraq has not affected oil production, which is mostly in the south and in Kurdistan, where fighters from the al-Qaeda-inspired Islamic State of Iraq have not advanced. (Karim Kadim/Associated Press)

The crumbling security situation in Iraq and concerns that Sunni extremists continue to gain power in the oil-rich country may help out proponents of so-called ethical oil who argue that the U.S. should be turning more to Canada for its oil needs.

But whether the crisis will have any effect on projects such as the controversial Keystone XL pipeline seems unlikely.

"Most people, in fact this is true of politicians as well, they don't know where the oil comes from and what are the ethical implications," said Dr. Robert Mansell, academic director of the University of Calgary's School of Public Policy.

"If you were to ask people in the States how much of their oil comes from Canada versus Venezuela versus Nigeria, Angola, Iraq and Russia, they would have no clue. Would they really care? I suppose they might care in a general sort of way, but not enough to make a difference in terms of the politics of piece of infrastructure."

Supporters of ethical oil have repeatedly argued that the U.S. should be endorsing projects like Keystone, importing its oil from friendly liberal democratic countries like Canada, and reducing its reliance on "conflict oil" countries that are undemocratic, have poor human rights records and may support terrorism.

Environmental groups opposed to the Keystone XL pipeline — which would carry bitumen extracted from Alberta's oilsands to refineries along the U.S. Gulf Coast — have dismissed the ethical oil organization, accusing it of being a mouthpiece of the domestic oil industry with ties to the federal Conservative party.

In April, the U.S. State Department announced another delay in the final decision on the Keystone XL project. U.S. President Barack Obama is not expected to make a decision on such a politically charged issue until after the midterm elections.

"If he truly wanted Keystone to go, he certainly could use [Iraq] as an excuse," said Laura Lau, senior vice-president at the Brompton Group. "But I don't believe he truly wants Keystone to go."

Iraq not a large supplier to U.S.

So far though, the conflict in Iraq has not halted oil production, since a lot of the production is in the south and in Kurdistan, where fighters from the al-Qaeda-inspired Islamic State of Iraq have not advanced.

Iraq also provides a relatively small amount of oil to the U.S. compared with other countries including Canada, the biggest exporter of oil to U.S, followed by Saudi Arabia, Mexico, Venezuela and Russia.

For example, the U.S. imported just over nine million barrels of oil from Iraq in the month of March, compared with 44 million barrels from Saudi Arabia and 99 million barrels from Canada, according to the U.S. Energy Information Administration.

"I imagine if the situation in Iraq gets so out of hand that you see a shutdown in the oil production or a pretty significant cutback in exports, and a notable increase in the world price of oil, then yeah, that would become part of the conversation," said John Duffield, an energy expert and political science professor at Georgia State University.

"I don't think [the ethical oil issue] has penetrated the American debate, at least not substantially," he said.

But Mansell said that the issue of security of oil supply could begin to resonate with some Americans. 

"In a world where the Middle East looks hotter rather than cooler these days, and you have events in Africa and similar things going on in Venezuela … and with energy prices going up, I think that will get attention among the general populace."

Mansell said the instability in Iraq certainly wouldn't hurt the case for Keystone

"Would it materially improve the case for it? I think what gets people's attention is what happens to the price of gasoline, and already there was a bit of a hit. I think it got some attention. I think it starts to have an impact on how people feel about reliance on some of their crude oil sources.

"Would it be enough to tip the balance on Obama's decision on Keystone, I don't know."

With files from The Canadian Press and The Associated Press


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