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Jeff Rubin is Senior Fellow at the Centre for International Governance Innovation and the author of The Carbon Bubble.

Lost in the political fallout from President Barack Obama's decision to once and for all reject Keystone XL is the fact that there is no longer an economic context for the pipeline. For that matter, the same can be said for any of the other proposed pipelines that would service the planned massive expansion of production from Alberta's oil sands.

Whether it's Shell's decision to scrap its 80,000 barrel a day Carmon Creek project or earlier industry decisions to abandon the Pierre River and Joslyn North mines, the very projects that were going to supply all these new pipelines are being cancelled left and right. At today's oil prices they no longer make any commercial sense. Western Canadian Select, the price benchmark for the bulk of oil sands production, is trading at $30 (U.S.) a barrel. That gives the oil sands the dubious distinction of being the lowest-priced oil in the world with one of the highest cost structures.

The key reason that Mr. Obama rejected the pipeline is that the U.S. market no longer needs Alberta's oil sands. Thanks to the shale revolution which has doubled U.S. oil production over the past decade, the security of Canadian oil supply no longer has the same cachet as it once did in the U.S. market. In fact, the explosive growth in U.S. domestic production from fracking shale formations in the Bakken, Eagle Ford and the Permian Basin has spurred the American oil industry to actively lobby the Obama administration to remove the export ban that was imposed after the OPEC oil shocks.

But it's not just the U.S. that doesn't need the oil sands' bitumen. Even if Alberta's landlocked fuel could get to tidewater, it's no more needed in foreign markets than it is in the U.S. market. Even world oil prices like Brent no longer justify any expansion of the resource. Worse yet, they signal the need for contraction.

Plunging oil prices may suggest that the world is awash with cheap oil but, in reality, what the world is really awash with is lots of expensive oil, much of it being produced at a loss. OPEC, home to the world's lowest-cost oil, is pretty much producing what it always has. The market glut is from increased output from high-cost producers like the oil sands. Their existential dilemma in today's market is that it is they, not OPEC, who must cut production to clear the glut.

The oil sands face an even bigger challenge in tomorrow's emission-constrained world. While President Obama has described the diluted bitumen that would have flowed through Keystone XL as "dirty", the real issue is not the carbon trail that comes from the fuel's extraction and processing. Admittedly it's dirtier than conventional North American oil although on a wellbore to wheel basis, the differences become marginal given that most emissions occur from combustion.

The real environmental challenge confronting the future of the oil sands is how much global oil demand will be destroyed in the future by the imperatives of stabilizing atmospheric carbon at 450 parts per million (ppm) and avoiding the worst consequences of global climate change. Will there be room in a decarbonizing global economy for high-cost oil and the high oil prices that allow supply sources like the oil sands to be economically viable?

If we consider what that world will look like, the answer is a resounding no.

For example, according to the International Energy Agency, a 450-ppm world will require world oil consumption to fall from its current level of around 93 million barrels a day to somewhere around 80 million barrels over the next two decades. That requirement certainly provides a very different perspective on the industry's future. Huge declines in oil prices, like the recent one that has sidelined so many oil sands projects lately, have always spurred powerful recoveries in global oil demand. But how much of a price recovery and how sustainable can one be in a world that will soon be driven to reduce its combustion of fossil fuels?

That world isn't far off in the distant future. As we are about to find out at the upcoming UN Climate Change Conference in Paris later this month, it's right around the corner.