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NBC Blames Higher Gas Price On US Oil Pipelines

From a shameless NBC News:

Increased gas prices? Blame lower US production, not Egypt 

By Patti Domm | July 10, 2013

You may soon find yourself paying a dime more for a gallon of gas, which you may blame on unrest in Egypt. You’d be only partly right. Another culprit, believe it or not, is how successful the energy business has been recently in the U.S…

Er, put us down with the unbelievers.

Inventories of domestic crude oil have plunged in recent weeks, driving up demand, and soon, the price to fill your tank.

So the "successful" US energy business has caused oil inventories to plunge? Not demand.

The industry has been innovating ways to move millions of barrels of shale oil from the center of the country to coastal refineries, and its efforts are paying off.

In a nutshell, this NBC News article claims that it isn’t the unrest in Egypt and the rest of the Middle East that is driving up the price of oil. NBC claims that it’s due to the increase of oil pipelines in the US. The pipelines that help us get more shale oil from Canada and help us get more oil from our interior to the refineries on the coasts.

But shouldn’t that make the inventories go up and the price of oil go down, since more oil is reaching the market?

Government inventory data Wednesday showed the steepest two-week drop in crude inventories in 30 years. Commercial oil inventories fell 9.9 million barrels from the week earlier, on top of a 10 million-barrel decline last week.

Oil prices have been rising on geopolitical concerns, with production offline in Libya and unrest in Egypt creating concerns about the Suez Canal shipping lanes. But the decline in inventories gave it another boost.

But this is not due to unrest in the Middle East. It’s those damn oil pipelines.

"Going along with ‘drill, drill, drill’ is now ‘ship, ship, ship,’ " said John Kilduff, energy analyst with Again Capital. "The bottleneck has been addressed in Cushing [Okla]. We’re seeing those inventories plunge. We’re seeing it from all the rail movement. It’s having an impact, as are the pipeline reversals."

Trains are carrying about 900,000 barrels of oil a day across North America, with rail taking North Dakota crude to the East and West coasts. According to IHS CERA, that number is up from 100,000 barrels of crude in 2010.

The reversal of the Seaway pipeline has taken crude away from Cushing to the Gulf Coast, and the Magellan Longhorn pipeline is now carrying crude straight from the Permian basin in Texas to Houston for refining.

That’s terrible.

The drawdown coincides with an increase in refinery runs, which at 16.1 million barrels a day for the week were at the highest level since July 2007. Distillate production of 5 million barrels was at an all-time high, and diesel demand, at 4.1 million barrels per day, was up 12.3 percent for the week…

In other words, more oil is reaching US refineries and being refined than at any time since 2007. So shouldn’t that drive the price of oil down? (Like it did in 2007.)

None of this makes any sense. But we know NBC would never lie to us to try to advance political agenda. After all, it’s not like NBC is trying to kill the Keystone Pipeline, or anything.

"It’s basically that the refiners are showing a demand for North American crude, and that’s why it’s approaching the global market price," said Gene McGillian, oil analyst with Tradition Energy…

In other words it’s demand that is driving up the price. And not the pipelines.

The U.S. is producing more oil itself and importing less, particularly from Algeria, Libya and Nigeria.

And that is causing the price of gas to go up in the US?

In the third quarter, the Magellan Pipeline is supposed to be moving 225,000 barrels a day from the Permian Basin to Houston area, he said. The Sunoco Logistics Pipeline—which began delivering crude last week from the Permian to the Port Arthur, Texas, area—is carrying 90,000 barrels a day and expects to go to 150,000 by year-end, he said.

Other efforts to move crude are in the works, including the southern leg of the TransCanada Keystone XL pipeline, now 80 percent complete and expected to have capacity for 730,000 barrels a day, he said. The southern section goes from Cushing to the Gulf Coast.

How horrible. Can’t Obama do something to stop this?

"These barrels are no longer landlocked, so they’re tracking the global price rather than that landlocked lower price they were seeing for the last couple of years," Kilduff said. "They say high prices cure high prices. The market there was broken, and the industry set its mind to liberating those barrels, and unfortunately for us, they did too good a job."

So we are supposed to believe that up until now we paid less for gasoline because oil from the US could not make it on the world market. Whatever happened to all that talk about oil being ‘fungible’?

This article was posted by Steve on Thursday, July 11th, 2013. Comments are currently closed.

3 Responses to “NBC Blames Higher Gas Price On US Oil Pipelines”

  1. Rusty Shackleford says:

    Meanwhile, Texas oil production surges to new heights: http://fuelfix.com/blog/2013/07/10/texas-oil-surges-to-highest-level-since-1984/?cmpid=hpts

  2. GetBackJack says:

    Dollar loses value.
    Energy prices go up.
    Why … it’s like some sort of Black Magic or something

  3. Noyzmakr says:

    And all this despite the EPA, BLM and Lil’ Hussein doing everything they can to put an end to US development and production.

    Another cause for the rise is all the different recipes the refiners have to crank out for all the different enviromental standards in each state.

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