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Thursday, June 10, 2021

Now That TC Energy Has Abandoned The Keystone XL, Some Observations -- June 10, 2021

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See this post, also. 

Also, activists are targeting Big Oil; why that could backfire

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.

Headlines:

  • TC Energy cancels critical Keystone XL pipeline (it couldn't have been too critical; we've lived without it for two decades)
  • Canada's oil industry optimistic as prices rebound

Now that TC Energy has abandoned the Keystone XL, some observations.

  • the Keystone XL, two arenas: the political arena, and the non-political arena
  • with regard to the political arena, the faux environmentalists won
  • the Keystone XL was the pipeline story that spawned all the rest, including the Enbridge pipelines, lines 3 and 5; the DAPL; the natural gas pipelines in the northeast; etc. The Keystone XL "win" was huge; hard to say whether it will affect outcome of existing pipeline fights;

The rest of the observations will address the non-political arena:

  • headline above: "TC Energy cancels critical Keystone XL pipeline": it couldn't have been too critical; it was on the drawing board in the early 2000s', probably as early as 2005 with the US shale revolution; "we've" lived without it for almost two decades; the pipeline couldn't have been too critical;
  • there is no evidence that Gulf Coast refiners will re-configure/optimize their operations for light oil as long as heavy oil is available;
  • most surprising: Canadian oil sands operators have survived some of the most brutal economic impacts over the past few years;
    • many thought that oil from the Canadian oil sands was landlocked; absolutely not true
    • headline today: western Canadian operators optimistic about the future -- this is the day after the Keystone XL project was finally abandoned; the western Canadian operators knew this was coming years ago;
    • but the US is still going to need lots of heavy oil
  • group-think: 
    • the big loser: Canada
    • the big winners: Saudi Arabia, Russia, Latin America
  • to some extent that's true, but it's all relative
    • in reality, with regard to this very small piece of the oil pie:
      • the big loser: US consumers (price of oil / price of gasoline goes up slightly)
      • safety and efficiency: CBR is so much less efficient and so much more dangerous than pipelines; and all those traffic crossings in Kansas and Nebraska -- they've just gotten a whole lot worse; 
  • the big winner: investors; CBR; every other pipeline operator; the Permian;
    • a number of readers are very, very aware of this and have written me to tell me how they are "playing" this story
    • the big winner: investors. If you don't agree, ask yourself two questions:
      • as an investor, ask yourself, where would you be investing had the Keystone XL been in operation today?
      • as an investor, ask yourself, where should I be investing now that the Keystone XL project has been abandoned, once and for all?
    • the answers to those two questions are fascinating
  • the Keystone XL -- other than transiting the Bakken -- had absolutely nothing to do with the Bakken; the Keystone XL was going to transport heavy oil, not light oil
    • add up the "negatives" and the "positives" and the demise of the Keystone XL was a net win for Bakken operators;

Bottom line:

  • in the political arena, all sentient Americans should be upset that the Keystone XL was killed;
  • in the investment arena, where I now live, we should all be happy that the Keystone XL was killed -- perhaps not happy, perhaps "neutral" at best, but taking advantage of this new reality, in our investment decisions.

I have flip-flopped on this. for the past ten years (?) I was in the political arena when it came to the Keystone XL; for over ten years I have been steadily moving from the political arena to the investing arena; I still have a long way to go, but I'm getting there.

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