Often lost in the important arguments of why to oppose the Keystone pipeline that would bring dirty tar sands oil from Canada to refineries in the U.S. Gulf Coast is that it will raise gasoline prices. How does bringing in more oil supply result in higher gas prices, you ask? Let me walk you through the facts. A combination of record domestic oil production and anemic domestic demand has resulted in large stockpiles of crude oil in the U.S. In particular, supplies of crude in the critical area of Cushing, OK increased more than 150% from 2004 to early 2011 (compared to a 40% rise for the country as a whole). Segments of the oil industry want to import additional supplies of crude from Canada, bypass the surplus crude stockpiles in Oklahoma in an effort to refine this Canadian imported oil into gasoline in the Gulf Coast with the goal of increasing gasoline exports to Latin America and other foreign markets. As the Wall Street Journal noted yesterday (subscription required) :

“The sale of an oil pipeline running from Oklahoma to Texas upended U.S. energy markets Wednesday, sending the price of crude surging above $100 a barrel …Enbridge Inc.—which bought a 50% stake in the Seaway Pipeline—announced it would reverse the direction of the flow, allowing more crude to move south from oil storage in Cushing, Okla., into the world’s largest refinery complex along the Gulf Coast. Over the past two years, the U.S. has started producing so much oil that existing pipelines have been unable to move it to refineries. That has led to a glut of oil in the center of the country, keeping the price of American crude far below that of petroleum traded overseas…With a new supply of oil headed to Gulf Coast refineries, exports of gasoline are expected to rise…For decades, oil has been imported from overseas to the Gulf Coast, then either refined there or moved elsewhere in the U.S. for processing.

The pipeline system was set up to move crude from south to north…U.S. oil production, which had been declining since the 1970s, is climbing again. After bottoming out at five million barrels a day in 2008, domestic production has jumped by 10% in the past couple of years. It is expected to grow even more amid a drilling boom, as companies use hydraulic fracturing to free oil from shale rocks…More crude flowing to the Gulf Coast will feed a growing energy-export business to Latin America’s rapidly growing economies. U.S. exports of petroleum products have reached 2.6 million barrels a day, double the level of three years ago. Roughly 15% of the gasoline and diesel refined in the U.S. is now exported, according to U.S. Energy Department data. “The middle of the U.S. should start considering applying for membership in OPEC,” said Phil Verleger, an oil economist who runs PK Verleger LLC. Industry analysts don’t expect rising U.S. crude-oil production to translate into lower gasoline or diesel prices anytime soon. So much gasoline and diesel is exported from the Gulf Coast that U.S. customers compete with customers in Mexico and the rest of Latin America—and have to pay as much as these foreign users…On Wednesday, U.S. oil prices jumped 3.2% to close above $100 per barrel for the first time since June, settling at $102.59 per barrel. Prices are based on oil stored in Cushing. And traders confronted the prospect that crude oil flowing into that storage hub would soon find a new route to refineries on the U.S. Gulf Coast—and from there to buyers of petroleum products around the world. Because of the glut in Cushing, the price paid for crude in the Midwest U.S. has been substantially less than European benchmark prices, such as Brent crude. This is expected to largely disappear by the middle of next year, as the Seaway pipeline change gets underway.”

Cushing typically is a busy place – I noted in my recent Senate testimony how Wall Street speculators were snapping up oil storage capacity at Cushing. And all of that surplus capacity is pushing WTI prices down – and for many in the oil business, downward pressure on prices is a terrible thing. As MarketWatch reports, “[B]y running south across six U.S. states from Alberta to the Gulf of Mexico, [the Keystone pipeline] would skirt the pipeline hub at landlocked Cushing, Okla., a bottleneck that has forced Canadian producers to sell their oil at a steep discount to other crude grades facing fewer obstacles to the market. ‘The markets need a solution really badly to the Cushing problem,’ said Lanny Pendill, senior energy and utilities analyst at Edward Jones.”

There are several global crude oil benchmarks, and the price differential between Brent and WTI now is around $10/barrel, which is a fairly significant spread, historically speaking. Moving more Canadian crude to bypass the WTI-benchmarked Cushing stocks, the industry hopes, will align WTI’s current price discount to be higher, and more in line with Brent.

While the U.S. Department of Commerce’s Bureau of Industry & Security requires “short supply” licenses for companies seeking to export crude oil, there are no such license requirements for exports of refined gasoline. To protect consumers, we ought to ask Congress to start requiring companies to at least apply for permission to export gasoline, or simply limit/ban the practice outright. Either way, it is clear that the Keystone pipeline isn’t just about expanding the unsustainable mining of climate-catastrophe Canadian crude, but also to raise gasoline prices for American consumers whose gasoline is currently priced under WTI crude benchmark prices.

Tyson Slocum is Public Citizen’s Energy Program director. Follow him on Twitter @TysonSlocum