Rice University researchers link oil price to U.S. dollar

A striking correlation between the greenback and oil – and a record of dramatic change – emerged from a review of three decades of relationships

By Gordon Jaremko

December 01, 2009

Dueling Pipelines

TransCanada and Enbridge cross swords over oil routes

The United States may need a reincarnation of Saint Patrick. Sixteen centuries after legend says Ireland’s national icon drove out its snakes, the U.S. Geological Survey (USGS) says a serpentine invasion is at hand. ¶ Two species among the world’s nine biggest non-poisonous snakes – Burmese pythons and boa constrictors are confirmed to be colonizing south Florida, the USGS says in a 323-page risk assessment report. There is also strong evidence that the northern African python is establishing a breeding population. ¶ The giant snakes can grow to be more than six meters long, weigh more than 90 kilograms, reproduce rapidly, do well in suburban or even urban areas, and pose significant threats to native wildlife and ecosystems, the USGS says. So far, the invasion is not being blamed on climate change and carbon emissions from burning fossil fuels. Human commerce is the culprit. The USGS suspects that the new serpent colonies sprang from fugitives that escaped from a lively traffic in pets and exotic wildlife exhibits.

The National Energy Board will decide the winner of a fight in the oil sands family. The industry split into factions over a question of whether it is getting too much of a good thing – export pipelines.

The quarrel began in private last March, says evidence in a case before the NEB. At a meeting with the Canadian Association of Petroleum Producers, Enbridge Inc. made a counter-proposal to rival TransCanada Corp.’s Keystone XL Pipeline project, which calls for a direct route south to refineries on the Texas and Louisiana coastline of the Gulf of Mexico.

The fight broke out into the open during NEB hearings on TransCanada’s construction application for the $1.7-billion Canadian leg of Keystone XL. Enbridge urged the board to reject the project and make exporters use its existing lines as far as the border with the United States.

Up to 700,000 barrels per day of empty, excess capacity could open up on established pipelines if Keystone XL is built due to slowed oil sands development since the 2008 energy price drop and global credit crisis, Enbridge warned. The result would be increases in shipping tolls under the Canadian system of ensuring that regulated pipelines can charge enough to satisfy their revenue requirements. Enbridge predicted that as the long-standing mainstay of oil shipping, its traffic losses could go as high as 606,000 barrels a day and generate toll hikes of $1.60 a barrel or a total of $515 million per year. Imperial Oil Ltd., Nexen Inc. and BP Energy Canada sided with Enbridge on principle, calling for rejection of Keystone XL in the name of economic efficiency.

But TransCanada countered with more than moral support. The pro-Keystone faction – Canadian Natural Resources Ltd., ConocoPhillips Canada, EnCana Corp., Shell Canada, Total E & P Canada, U.S. refiner Valero Energy Corp. and Swiss global oil trader Trafigura – has signed contracts for service on the proposed new export route to the Gulf.

Since Keystone’s customers also hold space on Enbridge’s pipelines, they are plainly willing to take a risk that their tolls might increase temporarily as a price of obtaining the new service until oil sands production growth revives, the NEB was told. In making TransCanada’s case for approval of the new export route, lawyer Wendy Moreland said, “not all capacity is created equal. Some, like the capacity proposed to the Gulf Coast via Keystone XL, connects supply – for the first time, directly – with a large, highly desirable and virtually untapped market.”

As the regulatory duel finished in October, the NEB set no date for a decision but it was expected by early 2010 under a board efficiency target of making rulings within three months.

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