The Problem in Cushing (Oil Glut)

[Shadowrider]

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?

It's flowing in because it's $85 oil vs. the alternative of $121 oil. They are doing something with it, otherwise it wouldn't be flowing in.

The crux of the matter is the .gov holding up the pipeline. They would rather have the Houston refineries bring in the $121 oil by tanker ship AND have to deal with the extra refining costs of the lesser quality crude from South America. It's a double whammy on keeping the cost of fuel up so they can paint big oil as a boogie man. It also keeps us using oil from countries that aren't real friendly with us (think Venezuela) instead of a friendly country like Canada.

 

[SMS]

It's flowing in because it's $85 oil vs. the alternative of $121 oil. They are doing something with it, otherwise it wouldn't be flowing in.

Or is it $85 because of the difficulty in getting it out and to market, as mentioned in the OP, and therefore a larger than average supply on hand?

If that's the case, building a new output pipeline will, in the end, reduce the overage at that location and drive prices back up, no?

I'm still missing something....my brain hurts.

You can't say..."help us get the oil out, we can't sell it!" on one hand but then on the other say "We keep bringing it in because it's selling cheap". You wouldn't send your product to a location that has output problems and a price lower than market would you?

 

[inactive]

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?

 

[Shadowrider]

Or is it $85 because of the difficulty in getting it out and to market, as mentioned in the OP, and therefore a larger than average supply on hand?

If that's the case, building a new output pipeline will, in the end, reduce the overage at that location and drive prices back up, no?

I'm still missing something....my brain hurts.

You can't say..."help us get the oil out, we can't sell it!" on one hand but then on the other say "We keep bringing it in because it's selling cheap". You wouldn't send your product to a location that has output problems and a price lower than market would you?

It really doesn't work that way. You have the oil companies (the producers) and then you have the refiners. Most people don't know that the Exxon Mobils of the world sell their crude. They don't refine it themselves. There are exceptions and they do have subsidiary companies that refine, but they are ran as separate entities. They will also sell off these refinery companies at the drop of a hat when the profit margin drops. They change hands all the time. Since the refiners have to buy the crude on the open market, naturally they are going to take the cheapest path. It's a complex issue. The Saudi's have some the the lightest (sweetest) crude on the planet. Some of the Canadian oil isn't too far behind. South America has alot of oil but it's generally a nasty heavy crude that's harder to refine (read costs more). There are a whole bunch of factors that affect the bottom line of a refiner and oil companies. Pipelines are beneficial to both and that translates to us too at the pump.

 

[SMS]

Very complex.

Guess my biggest question is would Cushing oil stay cheap if you can build a pipeline and clear out the 'glut'?

 

[Poke78]

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?

I think there is/was one in Thomas but it was previously contracted military aviation jet fuel, IIRC.

 

[ripnbst]

Didn't the one in Ponca City explode like 2-3 weeks ago? I had friends on the way to work in Cushing that morning and they saw the explosion from just outside Cushing. They said it looked like the sun was coming up the explosion was so big.

 

[inactive]

One in Ardmore too, I have found. So 6 total. Since there is this "glut" in Cushing, it seems like if we could increase refinery capacity in OK we could really leverage ourselves as an economic power. Of course, I know there's more politics (literally and figuratively) to it than that.

 

[rawhide]

Not an expert on the issue but do live in the area. Sac &Fox were trying to build a new refinery but, I'VE been told EPA restrictions are too prohibiting. Also, trains ran here when I first moved to the area in late 80s but tracks have all been removed. My. 02

 

[dieseltech09]

Didn't the one in Ponca City explode like 2-3 weeks ago? I had friends on the way to work in Cushing that morning and they saw the explosion from just outside Cushing. They said it looked like the sun was coming up the explosion was so big.

Were they still drunk from the night before? Even if one part did go up, like the it did back in 2003, it doesn't shut the rest of the Refinery down