Waiting for Keystone XL Approval

April 10, 2014

A "yes" decision on the Keystone XL project could come soon, says the Financial Post.

  • President Obama began stalling on the Keystone XL pipeline approval three years ago.
  • At the end of February, Obama told state governors that his decision on the pipeline would be out in a couple of months, and the State Department is in the final days of determining whether a revised Keystone XL route makes sense -- leaving markets expecting a decision any day now.

After the State Department released its environmental impact statement, showing no negative impact from the pipeline, groups have been expecting the project finally to receive the green light.

  • Opinion polls indicate that Americans support approval, and Republican and Democrat lawmakers have come out in favor of the project.
  • On top of this, Russia's latest aggression lends support to the case that the United States needs energy independence, with many pushing for U.S. exports to Europe.

Canada has suffered from the Keystone XL delay -- it has depressed Canadian oil prices, hurt profits and affected government revenue.

  • Canadian currency has grown weaker in the wake of uncertainty about oil market access, and energy transactions have slowed.
  • Investors have been watching the conflict over the pipeline unfold. If the pipeline is approved, Canada's dollar and energy markets should see a boost.
  • Forty percent of Canada's exports are energy, and oil and refined petroleum products constitute a quarter of all Canadian exports.

Hedge funds have generally not been betting on a Keystone XL decision because the approval process is so unpredictable.

Source: Claudia Cattaneo, "Keystone XL: Waiting for the Light Bulb Moment," Financial Post, April 3, 2014.

 

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