Stillwater Associates Study Links Distribution of Domestic Crude to Support Lower Pump Prices
IRVINE, Calif., April 9, 2012 /PRNewswire/ — New energy analysis supports the distribution of crude oil from North Dakota and Canada to stabilize prices of refined gasoline at the pump, according to Stillwater Associates LLC, an Irvine-based energy and oil consulting firm. Production of crude oil in the Mid Continent is growing but the means of distributing this cheaper crude oil to refineries around the country is limited. Though Trans-Canada’s Keystone XL oil pipeline faces stiff political and environmental opposition, David Hackett, president at Stillwater Associates, is supporting alternatives that could, if adopted, keep gas prices stable.
“The map (http://bit.ly/Hn6pfx) shows the price of WTI on April 5,” explains Hackett, “as well as the spread between WTI and other ‘marker’ crude oils. What is really interesting is the $40 spread between Western Canadian Select crude in Alberta and Alaska North Slope crude on the West Coast. We believe this huge arbitrage will drive investment to move WCS to the West Coast. Similarly, the $31 difference between Bakken and Brent will cause North Dakota crude to move to the refineries on the East Coast.
“Distributing cheaper mid-continent crude oil to the coasts will drive prices at the pump down. Additionally, getting cheaper North Dakota crude going to the east coast may help troubled east coast refineries.”
The bigger issue has always been how to deliver the crude oil safely and cost effectively. Stillwater believes crude will move by rail from North Dakota to the East and West Coasts as pipelines are bogged down in permitting and politics. Getting mid-continent crude oil to the east coast is also possible through existing pipelines between Canada and Maine down to the mid-Atlantic refineries.
In an article published recently in Philadelphia Inquirer (http://bit.ly/HobS4w) the author concluded that, “…North Dakota crude currently sells for about $30 a barrel less at the wellhead than the price of Brent crude, …currently priced about $120 a barrel. The Brent price is what Sunoco Inc. pays for oil imported from Africa to supply its Philadelphia refinery, which the company says will close on July 1 unless it finds a buyer.”
How long will these significant distribution differences between the interior and the coasts last? Stillwater believes domestic production will outpace our capacity to efficiently distribute oil for another five years or so.
For more information, visit Hackett’s blog at: http://bit.ly/Hn6pfx.
CONTACT: Dave Hackett, +1-949-653-5899, for Stillwater Associates
SOURCE Stillwater Associates