The end of Canada’s oil superpower pipe dreams – by Terence Corcoran (National Post – January 7, 2015)

The National Post is Canada’s second largest national paper.

The Washington dust has not yet settled around Canada’s Keystone XL pipeline, but the fuzzy images visible Tuesday through the political storm do not look promising. Nothing in the current play of politics and oil prices would lead to the conclusion that Keystone will ever get approved.

But it’s worse than that for Canada. As the world oil market swirls, not just Keystone is at stake. The greater risk is that the great national global energy superpower dream is going down the drain, washed away by a confluence of forces over which Canada has no control.

On Tuesday, the White House said President Barack Obama would veto the latest Republican effort to push a Senate Keystone bill through Congress. It was an easy decision for the President to announce, since it appears the Senate failed to come up with the necessary 67 votes to override Mr. Obama’s veto.

When even a Republican-dominated Senate can’t muster enough support to force the President’s hand, it’s a sure sign that environmentalists and other activist opponents of Keystone still dominate the pipeline decision-making process.

While Canada’s dreams of exporting more oil sands production to the United States face a grim political environment, the economic environment looks even shakier.

The price of West Texas crude dropped to $47.65 during trading Tuesday, and there was no reason to believe the oil price crash is near an end. At that price, Canada’s big pipeline plans could turn to pipe dreams.

The plunge in price of oil is more than just a surprise. This is what in official economic jargon is called an economic shock. Mostly, it seems to be a supply shock — brought on in part by the surge in U.S. shale production that in turn was created by technological change that is now sweeping the world.

Back in 2011, then Natural Resources Minister Joe Oliver told Washington that if Keystone were not approved, Canada had other options to “sell the oil elsewhere.” Oil industry officials blasted America with bravado: “OK pipe or lose our oil.”

Maybe that sounded tough in November, 2011, but since then the United States has emerged as the world’s fastest growing oil producer and the world’s largest oil producer.

For the rest of this column, click here: http://business.financialpost.com/2015/01/06/terence-corcoran-the-end-of-canadas-oil-superpower-pipe-dreams/