Will Warren Buffett Really Make Billions Off The Keystone Pipeline’s Demise? It’s Complicated

“The horrible truth ... is train transport is far more dangerous,” energy writer Brian Westenhaus has pointed out.

As just one example, forty-two people were confirmed dead in the 2013 Quebec train disaster, and several more are presumed dead.

“No pipeline failure has ever come close to this level of human death and suffering,” Westenhaus points out.

Rail executives themselves have said they expect to see crude-by-rail shipments increase because of Biden’s executive order.

The US State Department confirms that rail is a more dangerous way to transport oil compared to pipelines.

The environmental impact of rail is also worse. Research shows the spill rate for hazardous material transported by rail is 33 times higher than pipelines. Scholars at Carnegie Mellon University and the University of Pittsburgh also found that locomotive transport causes twice as much pollution as pipelines.

A Case of Unproductive Entrepreneurship?

Why would anyone spike an oil pipeline capable of transporting more than 300 million barrels of crude a year when moving oil by pipeline is cheaper, safer, and more environmentally friendly than moving it by rail?

Reuters never asks this question, though it concedes moving oil by rail is less efficient. (There are also benefits to moving oil by rail, of course, especially over short distances.) But one reason, perhaps, is that the pipeline was spiked because of its low cost and efficiency.

Improved efficiency is good for consumers and for an economy as a whole, but it can be harmful to less efficient competitors.

It’s been observed that in modern America there are two primary types of entrepreneurs: market entrepreneurs and political entrepreneurs.

“A pure market entrepreneur, or capitalist, succeeds financially by selling a newer, better, or less expensive product on the free market without any government subsidies, ” writes economist Thomas DiLorenzo.

Essentially, market entrepreneurs create value for society by serving the wants and needs of consumers. A political entrepreneur, on the other hand, “succeeds primarily by influencing government to subsidize his business or industry, or to enact legislation or regulation that harms his competitors.”

Essentially, improved efficiency is good for consumers and for an economy as a whole, but it can be harmful to less efficient competitors. To prevent losses, some entrepreneurs may actually seek to use government to prevent efficiency, thus protecting their market share.

Reuters assured us this is not the case with Buffett. They deny that canceling the Keystone XL would actually benefit BNSF, saying that the oil intended for Keystone would simply be moved by “existing and new pipeline infrastructure, not railways.”

This claim defies both common sense and an abundance of research, however.

Shipping oil by train doesn’t operate under the same price restraints as oil pipelines, which are regulated much like utilities by the federal government.

Bloomberg, for example, had published research showing that trains could expect to carry 125,000 more barrels of Canadian crude each day (an increase of more than 40 percent) if the Keystone XL was scrapped.

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Jonathan Miltimore is the Managing Editor of FEE.org. His writing/reporting has been the subject of articles in TIME magazine, The Wall Street Journal, CNN, Forbes, Fox News, and the Star Tribune. ...

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