The big news of the week is allegedly President Barack Obama’s inauguration speech, in which he laid out all his liberal plans for the next four years, very unusual for an inauguration speech.
Many likely think that Obama’s speech is the biggest economic news of the week. However, we also got some news this week that I think is the biggest economic news of the next four years.
Nebraska Gov. Dave Heineman has approved a revised route for the Keystone XL pipeline. The pipeline is supposed to link Canadian oil sands to refineries in Texas. The governor of Texas is a Republican, but regardless of party affiliation, governors face more pressure from constituents than they do their party. A recent example is New Jersey Gov. Chris Christie’s meltdown over the refusal of the GOP to approve a pork-ridden Superstorm Sandy reconstruction bill.
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The fact that the Heineman approved of a route that will pass through the state will add pressure to the Obama administration to give the approval. Even if the pipeline would only help slightly, Obama’s approval would be a sign of an energy-friendly policy. However, the Keystone XL pipeline is actual vital for oil transportation. Analysts at Goldman Sachs believe that the Keystone XL will be needed in addition to other pipelines.
Obama is now at a crossroads. Will he support American energy independence? Or will he turn to ‘green energy’? Obama got incredibly lucky by having a massive energy boom occur over the past few years. He likely was elected because of the hundreds of thousands of jobs created from the shale-oil boom.
Obama does not need to do much in his second term for that to continue. The International Energy Agency already predicts that the United States will become the largest exporter of oil by 2017. However, the president has the power to stop the boom.
Clearly, the president does not want to go down as the Grinch who destroyed the American energy boom. But he could argue that it is worth lower job growth if it comes at the expense of green jobs. This is why the Keystone XL decision now forces Obama to make what I believe is the most important economic decision for his second term.
The irony is that if the Keystone XL is denied, the Canadian crude will be transported to the United States via rail (no presidential approval needed here) with a larger carbon footprint — the real reason behind its delay and environmental opposition.
But none of that will matter to Obama if he wants to turn left to please his base, or for his own ideological supporters. The decision he makes will set the tone about energy policy over the next four years.
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