Exxon Spill Reverberates Through the Canadian Market

An oil spill in Mayflower, Arkansas could have severe implications for Canadian energy companies.

| More on:
The Motley Fool

Last Friday was not a good one for residents near Mayflower, Arkansas.  An Exxon Mobile (NYSE:XOM) pipeline carrying heavy oil from Illinois to the U.S. Gulf Coast ruptured, spilling thousands of barrels of oil.  Exxon has since shut the 96,000 barrel-per-day Pegasus pipeline and cleanup has begun, but this spill could end up having a lasting impact on more than just Mayflower’s residents.

Impact on Canadian companies

Flowing through the Pegasus pipeline was heavy Canadian crude oil.  This is the stuff produced by the likes of Suncor Energy (TSX:SU) and Imperial Oil (TSX:IMO).

Canadian crude oil pricing has been under pressure due to a lack of pipeline capacity throughout North America.  Just as the differential between Western Canadian Select and West Texas Intermediate had shrunk to its narrowest in more than a year, the closing of the Pegasus line means Canadian oil has lost an outlet for an undetermined amount of time.  This could contribute to the differential blowing back out.  Bad news for Canadian oil companies.

Although TransCanada Corp. (TSX:TRP) doesn’t face the same kind of price risk as the Canadian oil producers, the Exxon spill provides more ammo for those opposed to TRP’s Keystone Pipeline expansion.  This project will move oil from Alberta to the U.S. Gulf Coast, adding necessary pipeline capacity and keep the differential mentioned above narrow.  U.S. politicians are unlikely to ignore this spill, leading to further uncertainty for TransCanada and the producers that Keystone will serve.

Finally, one Canadian company that might actually benefit from the Pegasus rupture and ensuing clean-up is Badger Daylighting (TSX:BAD).  Badger’s Hydrovac excavator (essentially a big vacuum truck) is used primarily for digging trenches in congested grounds.  However, the trucks can also be used for debris removal.  A Reuters photo captured one of Badger’s trucks on the Pegasus clean-up scene.

Foolish Takeaway

Regardless of the size of the Exxon spill, its impact could be felt throughout the North American energy complex.  Particularly if it proves to be the final piece of evidence required by Keystone’s opposition to block the project.  Keystone offers a critical outlet for Canadian oil and if it isn’t constructed, it could be a sizeable setback for this country’s energy companies.

Nuclear is one source of energy that doesn’t require pipelines, and nuclear’s fuel, uranium, is currently flying under the radar of most investors.  Uranium has the potential to be the fuel that powers the 21st century.  Click here now for instant access to our FREE report titled “Fuel Your Portfolio With This Energetic Commodity”.  We think you’ll be surprised just how bright the future is for uranium, just how far two Canadian names have fallen, AND how fast they could rebound.  Click here now to access this free report, and hop on for the nuclear ride of your life.

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Iain Butler does not own shares in any of the companies mentioned in this report at this time.  The Motley Fool has no positions in the stocks mentioned above.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

Young woman sat at laptop by a window

SPY Stock Is Just the Tip of the Iceberg for Canadians Investing in the U.S.

These two BMO ETFs are great alternatives to just buying SPY.

Read more »

TFSA and coins
Stocks for Beginners

How a BIG New TFSA Change Could Affect You in 2024

Canadians are in for a BIG surprise for the TFSA in 2024. Here's how TFSA changes could help you keep…

Read more »

Growing plant shoots on coins
Dividend Stocks

2 Under-the-Radar Dividend Payers With Solid Growth Prospects in 2024

These under the radar monthly dividend payers could provide good growth prospects in 2024 and beyond.

Read more »

Bank Stocks

3 Reasons I’m Buying Royal Bank Stock Today

Royal Bank (TSX:RY) stock has shown signs of strength and yet still put aside $720 million in provisions for loan…

Read more »

Business success with growing, rising charts and businessman in background
Tech Stocks

Growth Stocks: A Once-in-a-Lifetime Opportunity to Get Rich

Here's why investing in quality growth stocks such as Docebo and Datadog may allow you to generate sizeable returns.

Read more »

Question marks in a pile
Dividend Stocks

Should You Buy BMO Stock for its 5.2% Dividend Yield?

BMO stock has outpaced the broader markets in the past two decades. But is this blue-chip TSX bank stock a…

Read more »

Mature financial advisor showing report to young couple for their investment
Bank Stocks

3 Top Financial Stocks to Buy on the TSX Today

The top financial stocks to buy on the TSX today are two small lenders and one Big Bank.

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Canopy Growth Corp: Will it Ever Be a Buy?

Canopy Growth Corp (TSX:WEED) keeps going lower. Will it ever find a bottom?

Read more »