The U.S. House of Representatives approved the project in a vote on Friday afternoon. A vote in the U.S. Senate is scheduled for Tuesday and it's widely expected the chamber will also give the OK.
That's when the uncertainty starts since there is speculation that President Barack Obama might use his executive powers to veto the measure. The Senate would need to muster a two-thirds majority to override such a veto and it's not clear there are enough Yea votes to do so.
"It’s very difficult to gauge Obama’s response because he has a lot of commitments to the green wing of the party," said Bob Gorman, chief portfolio strategist at TD Waterhouse.
But Gorman said if he had to guess, he'd say Obama won't use his veto power.
"They typically have horse trading involved so I would suspect that, to avoid seeming to go back on his commitment to bipartisanship, he would say, 'Look, I'll give you this but (there will be a series of environmental) riders attached to it," Gorman said.
Expectations had been high all along that Congress would vote on TransCanada Corp.'s (TSX:TRP) much-delayed $8-billion project. But feelings were that it wouldn't take place until 2015 when the new Congress was sworn in after the Republicans won control of the Senate in the November mid-term elections.
But things came to a head last week amid a run-off in the Louisiana Senate race between Republican contender Bill Cassidy and Democratic Senator Mary Landrieu. Both are both Keystone supporters and last Wednesday, following a request by Landrieu, the Senate scheduled a vote on Keystone for Nov. 18.
Gorman agreed that approval of the project would be a boost for the TSX energy sector as a whole "because it provides an outlet for the rising production and that's beneficial."
But he also points out that the project has shown the necessity for diversifying Canada's oil market.
"If anything, this has shown them you don‘t want to have all your eggs in one basket," he said.
"If Keystone is done on its own, without anything else, they‘re essentially doubling down on the U.S. market (and that's) one of the reasons that they — Alberta producers and Canada as a whole — would be wise to make this eastern link project (Energy East) happen."
He was referring to a plan by pipeline company Enbridge (TSX:ENB) to deliver oil from Western Canada and North Dakota's Bakken oilfields to Eastern refinery operations.
The Toronto market ended the week up 152 points or one per cent, led by gains in financial and materials stocks, leaving the Toronto market up nine per cent for the year so far. The Dow industrials inched up 61 points or 0.35 per cent.
The energy sector finished the week with a gain of about one per cent but has given up huge gains from the summer when oil peaked at around US$105 a barrel. It's now negative for the year after oil prices fell below US$75 a barrel last week before rebounding on Friday to just below $76.
Geopolitical worries have receded since the middle of the summer and have been replaced by concerns about rising supplies, especially from North America, and demand questions arising from a weak global economy.
"North American production just keeps busily grinding higher and then, on the demand side, I think the global growth outlook has taken at least a small step back even though the U.S. is chugging along," said Doug Porter, chief economist at BMO Capital Markets.
However, Porter said that while nobody knows where the bottom is for oil prices over the next few weeks or perhaps months, "we still believe the fundamental price for oil is something in the low 90s, based on the marginal cost of production."
On the economic front, it is expected that falling energy prices will manifest themselves in the latest inflation readings coming out this week.
Statistics Canada is expected to report Friday that its October Consumer Price Index declined by 0.2 per cent following a slight, 0.1 per cent rise in September.
"Gasoline was down by over one per cent annually through October, with more weakness ahead," observed CIBC World Markets economist Nick Exarhos in a commentary.
Meanwhile, economists expect to see the U.S. CPI ease by 0.1 per cent for October.