The Problem in Cushing (Oil Glut)

[Dale00]

Sounds like not such a bad problem to have. Will the Obama administration will jump in to make sure the needed pipeline construction is not hampered by government red tape?

The Problem With Cushing Oklahoma

...Canada is producing large amounts of oil and they have reversed a pipeline to carry oil to Cushing – but Cushing is a small place in the middle of nowhere. The tanks are full and there isn’t enough outbound capacity to send the oil anywhere.

With a glut in Oklahoma, that depresses the “benchmark” price – to the point the Saudis declared they no longer will sell their oil based in US prices, but based on North Sea oil.

So pretend you run a refinery in Houston and you have the choice of buying Cushing Oil from Canada @ $85 a barrel or Saudi oil at $121 a barrel (almost $1 a gallon cheaper? The answer is you can’t get there from here. Several companies want to build a new pipeline, but they are scared of the US government interfering for political reasons, and concern that some day Canada might lose interest in selling oil to Texas....

Even if it is built, 2013 is the earliest it could be running.

So what are your options?

Truck? - Cushing is about half way between Tulsa (on the East) and Oklahoma City. The nearest interstate highway is 15 miles away. According to Google Maps, the trip from Cushing to Houston is about 511 miles, and takes about 9 hours. Your truck is going to be returning empty. So a driver going back and forth is maybe going to be about to do 4 trips a week. The cost to ship crude by truck is a bit over $2 a mile – so each round trip for the truck costs around $2,500. A truck can hold about 200 barrels of oil – so that option costs about $12 a barrel – except there aren’t 1000s of idle tanker trucks sitting around. Canada is sending about a million barrels a day, which would mean you would need 5000 trucks a day making the round trip.

Barge? – Sorry, Cushing is nowhere near a river

Train? – Sorry – the nearest rail line is 35 miles away.

Tulsa has significant refining capacity and you can run trucks back and forth – but Tulsa is not on the main finished products (gasoline / Jet fuel) pipelines that are in Houston – so once you make it into gasoline, you still have to move it somewhere that can use it.

http://streamingradioguide.com/startingover/?p=2588

 

[SMS]

Why is Canadian oil being shipped to Cushing if they can't get it out of Cushing and nobody is buying it?

Got to be more to the story.....

 

[okie98]

I agree! There has to be more to the story.

 

[Shadowrider]

Did you guys not see this part?

So pretend you run a refinery in Houston and you have the choice of buying Cushing Oil from Canada @ $85 a barrel or Saudi oil at $121 a barrel (almost $1 a gallon cheaper? The answer is you can’t get there from here. Several companies want to build a new pipeline, but they are scared of the US government interfering for political reasons, and concern that some day Canada might lose interest in selling oil to Texas.

As an aside this is a comment from the site. Pretty well stated...

“Several companies want to build a new pipeline, but they are scared of the US government interfering for political reasons…”

Multiply that concern by about 10 million similar business decisions and you begin to see the size of the root cause of the problem with the U.S. economy.

 

[Dale00]

Oil is not "green" and the Obama administration's left wing base does not like pipeline construction or anything else that competes with "green alternatives." They think that Ecotopia is just around the corner if they can make coal and oil expensive.

 

[Cohiba]

What little I know about this situation.

1. Obama and his EPA director(forgot her name) need to get off of their a$$ and approve, allow,
and promote the rest of the pipeline to be completed!!!

2. Sometimes oil storage facilities will hold on to the material until the prices go up.

3. Isn't the completed pipeline going to have flow both ways...Gulf to Canada/Canada to the Gulf?

4. What ever the problems are....they need to be resolved!!! My Cushing oil storage stock has taken a dive....one is holding..low,but holding.


Cohiba

 

[870WingBlaster]

Can't comment on the article... but since this is happenning in my town, I can say that the pipeline work has been good for local businesses, especially restaurants.

 

[Cohiba]

I can remember Cushing and it's refineries and the "old" downtown. Then they re-worked the highway,killed old downtown, and shut down the refinery.

Dang, there were times when I thought old Cushing was dead amd ready to blow away.

Now with the oil storage/transportation pipeline..it has picked up!!! So much so Homeland security and the FBI help monitor the area.



Side note.....how long has my family been in and around Cushing?? I can remember my grandad talking about C.R.Anthony opening his first store in Cushing and my grandad talking to C.R. Anthony when he needed oilfield clothes and dress clothes.


Cohiba

 

[SMS]

Did you guys not see this part?

Yeah, saw that part...also read the rest of the article that says there is a transportation problem out of Cushing and the price of oil is being set by another source.

Which begs the question again: If there is a transportation problem, why is oil still flowing into Cushing. Why not send it somewhere else where it can be brought to market?

 

[870WingBlaster]

I could be wrong, but I don't think that there is many other places with the resources to house the volume that we can handle in Cushing.