The Problem in Cushing (Oil Glut)

[dieseltech09]

So in Oklahoma, just because I am curious and out of the loop, how many refineries do we have left?

2 in Tulsa, 1 in Wynnewood, 1 in Ponca City? Are those all we have left now?

Oklahoma
Ardmore Refinery (Valero), Ardmore 74,700 bbl/d (11,880 m3/d)
Ponca City Refinery (ConocoPhillips), Ponca City 194,000 bbl/d (30,800 m3/d)
Tulsa Refinery (Sinclair Oil), Tulsa 70,300 bbl/d (11,180 m3/d)
Tulsa Refinery (Holly Corporation), Tulsa 83,200 bbl/d (13,230 m3/d)
Wynnewood Refinery, Wynnewood 71,700 bbl/d (11,400 m3/d)
Ventura Refining and Transmission, Thomas 14,000 bbl/d (2,200 m3/d)

 

[Soothsayer]

Like most things in "economics," it is not so simple as the article would make it out. For all of you you think the guvment won't allow new pipelines, a new one has been built to Cushing in the last year--from Canada! For several years now, the oil companies have been building scores of new tanks around Cushing in anticpation of the new TransCanadian pipeline that they just finished around here (I believe it's still being built up North around Nebraska.). Refinery capacity may be a real issue, and the EPA has not approved a new refinery in more than 20 years (Big Oil has not really been that interested in them). There are very strict standards for refineries ,and there should be (as anyone who has ever lived near one of the many Superfund old refinery sites would probably tell you). In the past year oil reached an all-time high in price as well as supply. Does that make sense to the old supply and demand model, especially when you consider demand was actually down back in the spring when all-time records for price and supply were set? But the real questions are 1) does anyone really think Big Oil would like for more supply (of gasoline) to make it to market when by limiting it that can pretty much charge whatever they want for it? and perhaps, Big Oil and Big Gov. are in cahoots? Surely not, right? Both big corporations and government really have the best interests of the average American consumer in mind. Right.

 

[Hobbes]

We had a thread a while back that touched on this.

[Broken External Image]

In June 2010 TransCanada commenced commercial operation of the first phase of the Keystone Pipeline System. Keystone's first phase was highlighted by the conversion of natural gas pipeline to crude oil pipeline and construction of an innovative bullet line that brings the crude oil non-stop from Canada to market hubs in the U.S. Midwest.

Keystone Cushing (Phase II), an extension of the Keystone Pipeline from Steele City, Nebraska to Cushing, Oklahoma went into service in February 2011. The 36-inch pipeline connects to storage and distribution facilities at Cushing, a major crude oil marketing/refining and pipeline hub.

The proposed Keystone Gulf Coast Expansion Project is an approximate 2,673-kilometre (1,661-mile), 36-inch crude oil pipeline that would begin at Hardisty, Alberta and extend southeast through Saskatchewan, Montana, South Dakota and Nebraska. It would incorporate a portion of the Keystone Pipeline (Phase II) through Nebraska and Kansas to serve markets at Cushing, Oklahoma before continuing through Oklahoma to a delivery point near existing terminals in Nederland, Texas to serve the Port Arthur, Texas marketplace.

http://www.transcanada.com/keystone.html

In a nutshell, lots of new oil is flowing in from Canada and right now the bottleneck is Cushing.

Which brings up the Keystone XL expansion project.
It hasn't made a lot of news in OK yet, even though eminent domain cases have been initiated against landholders in OK already.
Here is a story in the oklahoman about an eminent domain condemnation against an OK farm that was later dropped:
http://newsok.com/article/3598678

TransCanada has filed more than 30 condemnation lawsuits in seven Oklahoma counties between the oil storage hub at Cushing and the Texas border.

Read more: http://newsok.com/canadian-company-...hrough-oklahoma/article/3598678#ixzz1XmxdzlDD


In Nebraska there have been many eminent domain condemnation proceedings and it's a real hot button issue.

On top of that, 4 different refinery companies have sued TransCanada to be released from their transportation contracts
because of cost overruns.

Even if the expansion project is approved it won't be finished for several years and won't reach full capacity until around 2050 so new storage capacity is being added in Cushing.
_________________________

What bothers me about the expansion project is it looks like the intention might be to condemn private land in the US to build a pipeline to the gulf coast that will probably be used to simply
load that crude oil onto gulf coast tankers and ship it to the highest bidder somewhere else in the world besides the US.
China maybe.
It's not the kind of crude that gulf coast refineries prefer to refine into gasoline as it's much more corrosive and has higher sulfur content than what they
refine now.

 

[Hobbes]

Like most things in "economics," it is not so simple as the article would make it out. For all of you you think the guvment won't allow new pipelines, a new one has been built to Cushing in the last year--from Canada! For several years now, the oil companies have been building scores of new tanks around Cushing in anticpation of the new TransCanadian pipeline that they just finished around here (I believe it's still being built up North around Nebraska.). Refinery capacity may be a real issue, and the EPA has not approved a new refinery in more than 20 years (Big Oil has not really been that interested in them). There are very strict standards for refineries ,and there should be (as anyone who has ever lived near one of the many Superfund old refinery sites would probably tell you). In the past year oil reached an all-time high in price as well as supply. Does that make sense to the old supply and demand model, especially when you consider demand was actually down back in the spring when all-time records for price and supply were set? But the real questions are 1) does anyone really think Big Oil would like for more supply (of gasoline) to make it to market when by limiting it that can pretty much charge whatever they want for it? and perhaps, Big Oil and Big Gov. are in cahoots? Surely not, right? Both big corporations and government really have the best interests of the average American consumer in mind. Right.

+1

This was posted in the other thread as well.

The drilling boom is being driven by a variety of factors. New technologies have allowed companies to tap vast new oil reserves in places like North Dakota, Texas and, most recently, Ohio. High oil prices are making once-unprofitable fields more tempting. And low natural-gas prices are leading companies to shift their focus to finding oil. Natural-gas drilling, which generally uses the same rigs but in different places, is down 8% in the past year.

All that drilling is helping to boost U.S. oil production. The U.S. pumped 3.9 million barrels a day from onshore fields in March, up 5.9% from a year earlier and the most in nearly a decade.

 

[SMS]

Interesting subject...thanks out to those will some experience/knowledge on the issue.

Here's a good read. Can't help but notice the Chicago connection.

http://www.platts.com/weblog/oilblog/2011/08/19/easing_the_cush.html

 

[Dale00]

I understand that Oklahoma refineries are operating quite profitably thanks to the low priced oil from Cushing.

I'd be wary of Chicago - too many gangsters.