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3 Pros, 3 Cons For TRP Stock & The Keystone XL Pipeline

How will the fate of the Keystone XL affect TRP stock?

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TRP Stock Cons

We simply don’t need the oil: The world was much different back in 2008, when the Keystone XL was first proposed. Back then, building the massive pipeline seemed like a no-brainer as oil prices were touching $150 per barrel and we were importing a record amount of energy. Fast forward to a world where formations like the Eagle Ford and Bakken are pumping out hundreds of thousands of barrels worth of crude oil daily and the pipeline doesn’t really make much sense. Even original backers of the project — like Continental Resources (CLR) — have voiced opinions that the mega pipeline is no longer needed at all.

Many Americans still don’t want it: Despite being a potential win for the overall economics, a lot of Americans simply don’t want the Keystone XL in their backyards. Currently, only 56% of Americans actually approve of the pipeline. That slight majority does not make the approval decisions any easier. And with mid-term elections around the corner, the pressure could be on for lawmakers to appease voters who oppose the project.

The economic benefits may not live up to the hype: Pick-and-shovel infrastructure projects generally are great boosts to a sagging economy. And the hope is that the Keystone XL will produce a plethora of benefits for the U.S. Unfortunately, some of that boost may not live up to the hype. TransCanada originally said that it will use between 3,500 to 4,200 construction workers to build the Keystone XL. However, opponents to TRP’s plans say that the pipeline will not actually create any real long-term employment gains. Additionally, the many Americans in the middle of the country could be faced with higher oil and gasoline prices as “trapped” WTI crude can be moved more freely. Rising fuel costs is one way to zap an economy real quick.

TRP Stock Verdict

For TRP stock, the cons against the Keystone XL are very real issues that President Obama will have to weigh when he makes his final decision. Ultimately, a verdict of “no” would send shares downwards.

However, the long-term picture for the project and TRP stock may actually be pretty rosy. The fact that TransCanada has considered the crude-by-rail option and already has portions of the pipeline in construction/completed basically means it’s coming regardless of the president’s actions.

So, should you buy TransCanada stock? Yes, TRP stock and its 4% yield are big buys.

As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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