If the Keystone pipeline is approved, the Canadian dollar (CAD) will go up because of the sales of petroleum to the United States. Thus, I am now watching the political issues surrounding the Keystone pipeline.

The CAD has fallen to a recent low on lower employment and growth numbers than expected. But this short term trend would be countered by the stronger and longer lasting effects of the pipeline.

The pipeline has virtually zero opposition in Canada, but it is running into some issues in the United States because the opposition questions the claims that it would substantially stimulate the economy. In addition, environmental groups are pushing back after the latest Arkansas oil spill, so the future for the pipeline is murky.

The former claim has some validity in the short term. There would be dueling forces of construction employment (building the pipeline) and lower oil prices (decreasing employment in the oil industry). But the longer term effects would be positive for the U.S. economy. By building the pipeline, we will, in effect, set a ceiling on gas prices. This, plus the shale oil boom, will have the same effect as a tax reduction – it will increase consumption, and thus stimulate the economy.

I do not know enough about environmental issues to substantiate the latter claim. But I do know that in political battles of environmental groups versus large industries, the industries generally win. I am biased to think that the pipeline will be passed, but I will wait to make any moves on the Canadian dollar until I am more certain of the outcome.