The juncture of falling oil prices colliding with TransCanada’s push for its US$8-billion Keystone XL pipeline may undermine the argument that the project makes economic sense, according to analysts.
Canadian oil prices hit a five-year low on Monday, dropping to US$40 a barrel. Benchmark brent oil also hit its lowest since July 2009, slipping from 65 cents to $61.20 per barrel.
Sandy Fielden, RBN Energy’s director of energy analytics, told the L.A. Times the impact of falling prices may rattle support for Keystone XL.
“The economics of this project are becoming increasingly borderline,” she said. But TransCanada isn’t showing any signs it’s fazed by the dropping prices.
Spokesperson Mark Cooper told the publication that its oil-shipper investors “have a good understanding of what the market needs over time. They do not make decisions based on short-term views or changes in commodity prices.”
And it appears the Canadian government isn’t nerved, either.
Natural Resources Minister Greg Rickford was in Washington Monday to meet with his American and Mexican counterparts. He addressed critics who are questioning the need for Keystone XL during a time marked by the plunging prices.
“This kind of price volatility reminds us how fragile the global economy still is — and for Canada’s purposes, how close to home it can still impact us,” Rickford said.
Policymakers take more of a long-term view of “20-to-40-year market expectations,” he explained.
“There are already 70 pipelines safely delivering oil and gas across our borders every day. Naturally, our government thinks that number should grow to 71.”
“Keystone XL could obviously help independence in secure sources of crude,” he said.
The recent slide in oil prices comes after a shift in American politics saw Republicans hold on to control of the House and gain control of the Senate in November’s mid-term elections.
It was a perceived change in fortune for pipeline supporters, who viewed the move as one that would make the controversial project “veto-proof.”
Keystone XL, if approved, would see Alberta bitumen carried to Texas refineries and ports. A series of high-profile protests have attracted celebrities including 350.org co-founder Bill McKibben and rock legends Neil Young and Willie Nelson.
According to the Associated Press, some economists are also growing increasingly worried the drop in oil may be symptomatic of “more troublesome forces at play.” They suggest cheap oil may hurt economies by reducing exports, jobs and spending.
Earlier this year, Prime Minister Stephen Harper told a business audience in New York City that the Keystone XL pipeline “absolutely needs to go ahead.”
“This is an enormous benefit to the U.S. in terms of long-term energy security,” Harper told the crowd. He also defended Canada’s oilsands projects, saying emissions are “almost nothing” when compared globally.
U.S. President Barack Obama, however, has taken a more critical approach to the project. He has repeatedly told Americans his decision will be based on environmental considerations.
“Keystone is a potential contributor of that [emissions] … We have to weigh that against the amount of jobs it’s actually going to create — which is not a lot,” Obama said on a Dec. 8 episode of “The Colbert Report.”
The White House is expected to make a decision on the fate of Keystone XL early in the new year.
With files from The Canadian Press
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Source:: The Huffington Post
