Hugo Chavez Told Me He Won't Sell Oil to the Kochs
Feb 7 2013
Greg Palast is a New York Times bestselling author and fearless investigative journalist whose reports appear on BBC Television Newsnight and in The Guardian. Palast eats the rich and spits them out. Catch his reports and films at www.GregPalast.com, where you can also securely send him your documents marked, "confidential".
I’ve been tracking a tube of black putrid ooze, a toxic viper slowly slithering 2,000 miles across the belly of America, swallowing all water aquifers, politicians and reason in its path.
The XL Keystone Pipeline.
As Nagini, the murderous snake in the Harry Potter tales, had its master Voldemort, I figured the Keystone XL Pipeline must also have its own dark lords.
And the Dark Lords of the Keystone Pipeline left clear clues: environmental horror, political payouts and the odour of sulphur stronger than explained by the stinking hot tar inside it. I smelled Koch.
David and Charles Koch are each worth $20 billion (£12.7 billion), and they’re quite certain that’s not enough. And so they need the XL Keystone Pipeline.
The XL Keystone will take Canadian tar-sands oil, the filthiest crude on the planet, and suck it down to Texas’ Gulf Coast refineries. Alberta’s oil-glop reserve, if it can get to the US market, will warm the planet by nearly 0.4°C all by itself.
Why in the world would America pistol-whip Mother Nature to bring oil to Texas? I mean, it’s just plain weird to suck heavy tar oil out of Canada to drag it across the entire middle of the USA and import it into the oil-exporting Lone Star State.
Here’s where a little lesson in oil chemistry comes in. You can’t just throw any old crude oil into an oil refinery. These giant filth factories are actually quite sensitive. The refineries of the Texas Gulf Coast are optimised for heavy crude.
It would cost billions of dollars to rebuild the giant Flint Hills Corpus Christi Refinery, owned by Koch Industries, to use the less-polluting Texas oil drilled nearby.
The Kochs need heavy crude. But the Brothers Koch have a problem. Heavy crude is controlled by a heavy dude – President Hugo Chavez of Venezuela.
The Koch brothers.
In case you haven’t heard, the US Department of Energy now says Venezuela, not Saudi Arabia, has the world’s largest petroleum reserve – including the overwhelming bulk of the planet’s heavy crude.
And Chavez is not giving it away. “We are no longer an oil colony, Mr Palast,” Chavez told me during one of our meet-ups in Caracas.
He wasn’t kidding. Venezuela’s export price now averages around $100 (£64) a barrel.
So the Kochs have turned their gaze upward – to Canada, where Alberta oil men are selling their tar-sands gunk for a whopping $33 (£21) a barrel less than Chavez’s heavy. Do the maths: With 289,000 barrels a day refined at Corpus Christi, switching from Venezuela heavy to Canadian tar could put an extra $3 billion (£1.9 billion) a year into the pockets of the Kochs.
However, there’s a problem. Between Canada and Houston is the United States. At the moment, there’s no pipeline that can take all that cheap crude south. The southbound pipeline network now chokes at Cushing, Oklahoma, which is already blocked with 47 million barrels of crude sitting in storage tanks with nowhere to go.
So all the Kochs have to do is get the US government to agree to pop a pipe through Cushing to Houston: the Keystone XL. But that would require that the US government go stark raving mad, commit environmental suicide and reverse all policy to slow global warming – all to bring in foreign oil while the US itself is suffering from a major oil and gas glut.
Furthermore, approving the Keystone XL Pipeline will raise the price of heating oil and gasoline in the US.
Let me repeat: Approving the Keystone XL Pipeline will raise the price of oil and gasoline.
This is the nasty little secret of the pipeline lords and unknown to all but experts. Every Republican politician and not a few Democrats have promoted the fairy tale that the XL Pipeline will reduce gasoline and oil prices throughout the USA.
It’s bullshit, but it’s gospel – utterly unquestioned by the mainstream media. Even opponents of the pipeline buy the lower-cost-oil line. For example, the New York Times editorialised that, “We do not think that the [economic] benefit from Keystone XL outweighs the certain damages” to the environment.
But the “benefit” is bogus. Prices for gasoline will rise by about 15 cents (nine pence) a gallon in the Upper Midwest if the pipe opens.
Here’s why. Normally, the supply of crude oil in the US doesn’t have a damn thing to do with the price of gas you put in your Humvee. Normally, Canadians could hose us down with hot tar and it wouldn’t change oil and gas prices by a penny.
That’s because the international price of oil is not set by supply and demand in the marketplace. Rather, the price is fixed by a dictator in a bathrobe, Abdullah, King of Saudi Arabia. He dictates, you pay.
But there are always anomalies.
As matters stand, with nowhere to dump their tar goo, Canadians have to sell at a $33 (£21) a barrel discount to nearby refineries in the US Upper Midwest.
American consumers are getting the benefit of this oil backup. Indeed, one angry Canuck, Cenovus Energy CEO Brian Ferguson, complains that the pipeline plug results in "subsidisation to the United States consumer by $1,200 (£764) per Canadian".
The XL Pipeline would act as an oil enema, releasing the impacted inventory, enriching the Gulf refineries.
The result of opening the spigot through the XL Keystone will mean that US Midwest retail heating oil prices will skyrocket and gasoline in the region, as the crude drains away to other refineries, will rise an estimated 15 cents a gallon.
True, cheaper crude oil will now flow south, but as Canadian economist Robyn Allan writes, “It's the refining sector that sees the benefit of lower-priced WCS [West Canadian Sands oil] in the form of windfall profits from low feedstock costs.”
The gusher of cheap crude from a new pipeline will enrich the refiners – none more so than refiners named Koch.
But how will the Kochs get Obama and the US government to turn against US consumers and their own green policies and promises? We'll get to that next week.
I’ve been tracking the Kochs for 18 years, first as a private investigator on a case of oil missing from a Native American Indian reservation.
One thing from that case sticks with me even today. The trail of missing oil led to Charles Koch himself, who (according to a secret recording), told a co-conspirator why he did it. The billionaire said,
“I want my fair share. And that’s ALL OF IT.”
And "all of it" now includes a pipeline filled with hot, cheap oil.
Follow Greg on Twitter: @Greg_Palast
This week, readers of VICE can download the film The Assassination of Hugo Chavez – based on Palast's investigations from The Guardian and BBC Television – free of charge.