Would Keystone XL make a difference in future oil prices?

November 19, 2014 | By Doug Peeples

The Keystone XL pipeline fell short in Congress by one vote Tuesday, but the questions regarding its possible effects on oil prices have been a topic of conversation since TransCanada first proposed the link between Western Canada to the U.S. Midwest and Gulf Coast several years ago.

Pipe stacked at the southern site of the Keystone XL pipeline in 2012. Credit: Tom Pennington/Getty Images

As well as being a contentious environmental issue, the big question for Americans is how the pipeline would affect gasoline prices.

Curt Launer, a managing director with Deutsche Bank, may have phrased the opinions of many analysts best when he told CNBC a year ago: "The question is, what impact would this have on consumer prices? The answer is none."

XL would give Canada a much improved outlet for its Western Canadian Select, which is now considered the cheapest available. The access the pipeline would give TransCanada to Gulf Coast refineries would be good for Canada because it mean it could raise its price for the oil sands crude.

But as far as influencing prices at U.S. gas pumps or oil prices on the global market, the prevailing thinking is that the effect would be minimal, if any. Phrases like "no material impact" are common among industry analysts and observers.

And that, they say, would continue to be the case whether the pipeline is approved or not. One major reason for their thinking is that XL is not considered as important as it would have been when it was first proposed. As the Christian Science Monitor pointed out Tuesday, oil sands from Alberta and crude oil from North Dakota and Montana have found other ways to reach the refineries, by rail and other methods.

And while falling oil prices have many oil companies and investors considering or planning expansion project curtailment or delay, U.S. oil production is very high now and augmenting the country's oil supply with contributions from Canada isn't as important as it would have been earlier.

For more:
- read this backgrounder

http://www.fierceenergy.com/story/would-keystone-xl-make-difference-future-oil-prices/2014-11-19