Yesterday, the House voted to approve construction of the Keystone XL Pipeline. That vote was no surprise; the American people support that construction by a margin of 70% to 27% according to the latest polls. Nevertheless, I was interested to hear the coverage by CBS News of the vote. The only sound bite that CBS used came from representative Peter DeFazio, a strident opponent of the pipeline. DeFazio announced that since the oil from the pipeline would most likely be exported, it would only result in lower prices for consumers in China or other foreign countries but it would not help American consumers.
Think about that. In one small sound bite, both DeFazio and CBS display colossal ignorance about economics and oil prices. Oil, in fact, is sold on a world market. Oh, there are some price differences between oil sold in Europe and oil sold in the USA, but those differences are minor. If the price declines in Asia or in Europe due to a large increase in the supply of oil, then the price in the USA also declines. That is the reality. For DeFazio to claim that Keystone will only drop prices in China or Europe while leaving American prices unchanged is just nonsense. The world market will not allow that to happen.
Think about that. In one small sound bite, both DeFazio and CBS display colossal ignorance about economics and oil prices. Oil, in fact, is sold on a world market. Oh, there are some price differences between oil sold in Europe and oil sold in the USA, but those differences are minor. If the price declines in Asia or in Europe due to a large increase in the supply of oil, then the price in the USA also declines. That is the reality. For DeFazio to claim that Keystone will only drop prices in China or Europe while leaving American prices unchanged is just nonsense. The world market will not allow that to happen.
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