TransCanada Corporation (USA) (TRP), Marathon Petroleum Corp (MPC), Suncor Energy Inc. (USA) (SU): Will Keystone Increase the Price You Pay at the Pump?

So could the Midwest refineries protect their record profits once the oil glut is relieved? Once again no – excluding transportation costs and taxes there’s only one market price for gasoline. If Midwest refineries attempted to gouge consumers they would be priced out of the market and competitors would steal their business.

This means the price you pay at the pump won’t be impacted by Keystone.

What does this mean for investors?

This discussion does illustrate the important implications Keystone will have on the North American energy market and the consequences for investors. If approved, the pipeline will have three major impacts for the oil patch:

First, Keystone will significantly reduce the margins for mid-continent refineries. For the Midwest’s largest refiner Marathon Petroleum Corp (NYSE:MPC) , the pipeline will increase the company’s input costs which can’t be passed on in higher gasoline prices to the consumer. The company’s profit bonanza will come to an end.

Second, higher Midwest crude prices will increase the prices that U.S. and Canadian producers receive for their product. Suncor Energy Inc. (USA) (NYSE:SU) will be a big beneficiary. The company’s oil sand operations produce 359,200 barrels of crude oil per day. In recent months Western Canadian oil has been discounted by as much as $40 per barrel to international benchmarks, and this has severely crimped the company’s profitability. Keystone will end this problem.

Third, Keystone will have a small positive impact on the margins of refineries along the Gulf coast. Crude shipments from Canada will displace traditional imports that would’ve arrived via tanker.

Foolish bottom line

Keystone won’t impact the price you pay at the pump. But the project will have major implications for the energy industry.

The article Will Keystone Increase the Price You Pay at the Pump? originally appeared on Fool.com.

Robert Baillieul has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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