New Cushing pipeline: Who stands to gain?

Installation of new pipelines traversing Cushing is seen to help ease the flow of oil in the North American region; however, its effect on the public cannot yet be ascertained. According to local producers of oil and gas it would help the industry but would not push crude oil prices up.

The house seems divided among industry experts. Some say that it will pave the way for lower crude prices because of the influx of fresh oil supply in the market; others believe otherwise.

The majority of oil in the mid-country is of the light, sweet crude variety which refineries prefer. That is why the West Texas Intermediate (WTI) oil has, in the past, fetched a higher price versus the Brent North Sea oil. Lately, the tables have been turned in favor of Brent oil as the latter now sells at $30 a barrel more than WTI.

“That price differential represents just under $100 million to the state in gross production tax alone,” noted Sec. Michael Ming of the Oklahoma energy sector. “Then you take that price differential and look at producers who have lost revenue. That translates into investment into the industry and to jobs. You have a lot of lost revenue that could go to new oil investment.”

Industry leaders at Oklahoma are hopeful that the new pipelines in Cushing will benefit local producers by hitting a price that is close enough to that pegged in the world market.

Major industry players noted that the public stands to gain little even if local producers sell at lower prices.

Refiners have a different point of view. They say that residents of Oklahoma may actually pocket some savings in view of the disparity in selling prices, and how to invest these savings is already a matter of discussion among local residents.

Bill Day, spokesperson for Valero commented that “The Midcontinent and Rocky Mountain regions currently have the lowest price, where traditionally the lowest gasoline cost have been found along the Gulf Coast,” and added that “The Mid-Continent is enjoying the country’s best gasoline prices. They are still higher than last year, but lower than the rest of the country.”

Nevertheless, industry observers opined that installation of the pipelines may result in increased gasoline prices.

The Oil Change International group agrees that there is actually little gain for the local consumer. One OCI spokesperson stressed that “If anything, consumers particularly in the Rocky Mountain region may see prices increase as the price in these regions align with international prices.”