The Impact of Cancelling the Keystone XL Pipeline on Gas Prices in Canada

The cancellation of the Keystone XL pipeline has been a topic of much debate, particularly in the context of its impact on gas prices in Canada. Many argue that since Canada continues to export large amounts of petroleum, there should be no significant effect on gas prices. However, the reality is more complex.

Short-Term and Long-Term Economic Implications

In the short term, the cancellation has primarily impacted Canadarsquo;s trade balance and fiscal revenues. Increasing dependence on hostile overseas dictatorships for petroleum reserves has raised concerns about energy security and geopolitical risks. Additionally, the trade deficit in Canada has worsened, and taxes had to be increased to replace the lost revenue from oil exports. Long-term, the cost of oil and gas development in Canada may rise, justifying higher gas prices.

Minimal Direct Impact on Gas Prices

Theoretically, one could argue that the pipeline would transport heavy tar sands oil, which is a different crude oil than what is refined into gasoline. Heavy tar sands oil is primarily used for building materials, roads, and petrochemicals, not gasoline. The oil in the Keystone XL was mostly destined for refineries on the U.S. Gulf Coast rather than directly to Canadian consumers, meaning any impact on gas prices would be minimal.

Environmental Taxes and Other Factors

Environmental taxes, road taxes, federal taxes, and the Goods and Services Tax (GST) and carbon taxes are significant contributors to the price of gasoline in Canada. Before the pipeline was cancelled, Canada was already producing and exporting large amounts of oil. The tax burden that had to be maintained regardless of the pipelinersquo;s status meant that the impact on gas prices was minimal.

According to estimates, shutting down the Keystone XL pipeline had cost Canada approximately 10 billion annually in taxes and royalties. However, the direct link between the pipelinersquo;s cancellation and changes in gas prices is difficult to pinpoint, given the diverse sources of Canadian oil and the comprehensive tax system in place.

Conclusion

While the cancellation of the Keystone XL pipeline had some long-term economic implications for Canada, it had minimal direct impact on gas prices. The factors influencing gas prices in Canada are complex and include a range of taxes and environmental considerations. The pipeline may have altered the global trade dynamics of heavy tar sands oil, but its short-term impact on gas prices for Canadian consumers was negligible.