Is President Donald Trump's approval of the hotly disputed Keystone XL pipeline good or bad for oil and gasoline prices?
The simple answer is we don't know yet.
At least some analysts and U.S. oil producers worry the project could further depress prices by adding more crude to an already oversupplied global market.
Opposed by the Obama administration over environmental concerns, TransCanada's Keystone XL would bring heavy crude from Canadian tar sands to Steele City, Nebraska. From there, it would link up with an existing pipeline and send the oil to refineries on the Gulf Coast.
A big question is what happens to the fuel after that.
The United States will probably end up shipping much of the refined oil to Asia or Europe in the form of gasoline and other fuels. But forecasts for oil demand are not currently increasing enough to absorb rising U.S. fuel exports, so there is a risk that refined Canadian crude gets stuck in already brimming U.S. storage tanks.
Canadian tar sands oil is already moving by rail, so completion of the 800,000-barrels-a-day Keystone XL pipeline would not necessarily cause a huge surge in output. But it would support planned production increases from Canadian fields and make transportation more efficient.
"This pipeline will just make it easier for that oil to not only get to our market but to the global market, improving supply. So keeping a lid on prices is the bottom line," John Kilduff, founding partner at energy hedge fund Again Capital told CNBC's "Squawk Box" on Monday.
Oil prices recovered above $50 late last year after OPEC and 11 other crude exporters including Russia agreed to cut output. But prices have fallen in recent weeks as U.S. drillers take advantage of the rebound to pump more, raising concerns about brimming American stockpiles.
The pipeline's approval appears to have already registered in the market, according to Kilduff. He noted that prices for 10-year crude oil futures have begun to come down relative to current prices.
Higher U.S. fuel exports could put upward pressure on gasoline prices, according to Patrick DeHaan, senior petroleum analyst at GasBuddy. The rising demand for Western Canadian Select crude oil would help narrow the gap with pricier U.S. West Texas Intermediate crude, which could cause motorists to pay more at the pump, he explained on Monday.
"This is really a story of an early Christmas for Canada," he told CNBC's "Squawk on the Street."
Crucially, the Keystone XL pipeline will not be operational until about 2020, said Helima Croft, global head of commodity strategy at RBC Capital Markets.
"This is very important for Canada's outlook and to be able to move their barrels, but does it really impact the market tomorrow? No," she told "Squawk on the Street."
Oil market players are currently focused on global inventories of crude oil and whether oil producers will extend their six-month deal to cut output through the second half of 2017, Croft noted. In her view, OPEC and other participants are likely to do so because the alternative is a potential sell-off — an unpalatable outcome for exporters whose state finances rely on oil revenues.
It remains too soon to tell where global crude inventories will stand by the time the Keystone XL starts moving oil.
Beyond the short-term price concerns, Keystone XL provides a path toward long-term American energy security, a priority for the fossil-fuel friendly Trump administration.
The pipeline would strengthen already strong energy ties between the United States and Canada, potentially displacing crude imports from other countries.
"One of the initial arguments about energy independence with this pipeline was that we're getting more crude from Canada," Croft said. "We're not getting it from other countries in the Middle East, so it's basically increasing our supply security through giving us relations with friendly producers as opposed to being dependent on producers that we sometimes have problematic relationships with."