The stated purpose of the proposed Keystone XL Pipeline is to transport crude oil taken from the oil sands in Canada’s Alberta province southward to the refining facilities located in the United States mid-South region of Oklahoma and along the Gulf Of Mexico coastline. When those oil sands were viable as a source of crude oil, the project made infinite sense, but a major hitch has developed.
I wrote previously, HERE, about the jeopardy into which falling crude oil prices have put crude oil extracted in the US through the use of hydraulic fracturing, also known as fracking. Crude oil extracted from oil tar sands have in common with fracking the vulnerability of high extraction costs when compared with traditional methodologies used with traditional oil deposits.
Today, the price of West Texas Intermediate (WTI) crude oil (the common U.S. standard) stands at less than $47 a 42-gallon barrel, and it will almost certainly go lower. The Saudi’s have publicly stated that they will not curtail production in their Saudi Arabian oil fields, even if WTI crude goes down to $10 a barrel. The death of King Abdullah may cause a twitch or two in the markets, but no long-term change in the trend.
Although the newly elected Congress seems bent on sending to the President’s desk a bill mandating the construction of the pipeline, it may be time to think about whether or not the project still makes economic sense, especially in light of President Obama’s vow to veto such a bill.
Maybe the best approach is to wait for a new occupant of the White House, one that will surely be more objective in evaluating the project on its merits.