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Supporters of the controversial Keystone XL pipeline may have to face the reality that the project cannot generate the revenue it needs to be profitable. Extracting oil from tar sands was always going to be extremely costly, but due to the fact that gas prices are down and they do not look to rise anytime soon, some economists do not understand the viability of the pipeline. The controversial project has been front and center in the Republicans’ critique of the Obama administration. Republicans, with the help of key Democrats, have been campaigning for the past six years throughout the country on the notion that the pipeline would bring economic prosperity and job growth. The facts and figures in these two areas have been widely debated, and a new report from the Los Angeles Times details some of the concerns:

Plunging prices have put oil firms around the world under stress, placing smaller operations in danger of bankruptcy. Canadian firms were already under pressure from the boom in production by the U.S. shale-oil industry; the Saudi move squeezed them further.

The market shift has put TransCanada in the position of a real estate developer vying to build a skyscraper during the depths of the mortgage crisis. And while the Keystone investors are big enough to endure years of losses on the pipeline, that was never their plan.

Even at the Manhattan Institute, a free market-oriented think tank with little patience for the arguments made by pipeline opponents, questions are emerging about whether Keystone still deserves star billing in the energy debate.

“I’m for cheap, abundant, reliable energy. Period,” said Robert Bryce, a senior fellow at the conservative group. “This is not ideological. This is about what the economics say.… The project is clearly very challenged right now.”

“The symbolism has outstripped the reality,” Bryce said. “Both sides have decided we are going to fight over this, regardless of the big picture now emerging with oil prices.”

Republicans have stayed firm in their support of the pipeline and have vowed to push for approval once they take control of Congress in January.

— Posted by Donald Kaufman.

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