Keystone Pipeline Delays Forcing Deep Discounts Onto North Dakota Oil

According to CBS, because of oil production outstripping capacity to transport that oil to market, North Dakota producers are taking deep discounts for their products:

BISMARCK, N.D. — North Dakota oil production is outpacing the ability to efficiently move the product to market, causing drillers to take deep price cuts at a time when national gasoline prices are on the rise, the U.S. Department of Energy said.

Crude oil from North Dakota’s rich Bakken and Three Forks formations has traded at record price discounts in 2012 compared to West Texas Intermediate, the U.S. benchmark, according to the Energy Information Agency, a branch of the Energy Department.

The agency said Bakken crude reached a record price gap of $28 a barrel on Feb. 10. The price discount has thinned in recent weeks but remains well above historic levels, the agency said.

What’s driving a lot of this is the on-going delays in building the Keystone pipeline:

State Mineral Resources Director Lynn Helms said prices for North Dakota sweet crude generally mirrored West Texas Intermediate prices last year but began widening in January when President Barack Obama temporarily halted the $7 billion Canada-to-Texas Keystone XL pipeline, which would have carried 100,000 barrels of crude daily from North Dakota and Montana.

“The Keystone XL was slated for 100,000 barrels a day in volume, and with that delay, the oil traders picked up on that,” Helms said.

All avenues for transporting oil out of North Dakota – highways, rail, etc. – are running at full capacity. The Keystone pipeline would represent a huge new avenue for that oil, except that the Obama administration continues to roadblock it.

Rob Port is the editor of SayAnythingBlog.com. In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters. He writes a weekly column for several North Dakota newspapers, and also serves as a policy fellow for the North Dakota Policy Council.

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  • borborygmi

    How long would it take to build the pipeline and have oil flow through it?

  • The Fighting Czech

    if ND crude goes so cheap,  why is Fuel so expensive in ND?    ND produced gasoline, and Diesel should be noticeably cheaper, shouldnt it? 

    • headward

      Taxes.

    • Caeslinger

      Almost none of the oil stays in ND, one, and two, gasoline is trading for $3.30 in NY, add about $0.60 for taxes and transportation costs, it would normally be $3.90 here, so do the math and tell me we aren’t seeing benefits from the local reduction in oil pricing.

  • cylde

    The bakken oil companies might slow down developments until the price rises. The figures that were reported were that it costs 40 to 50 dollars to get a barrel out of the bakken. Crude does not spoil in the ground so they may choose to make less now and more later.

  • $8194357

    Agian folks…Who ever controls the structures control the outcomes…From simple structure complex agendas and ideologies grow and flow..Our light sweet crude S/B fetching top dolllar in any market and yet it isn’t due to “shipping” “refinery capacity” “federal regulation and controls”???
    Who controls the structures policies rules and regulations…THEY are the ones manipulating and controlling the “OUTCOME”…Follow the money trail and see “WHO” is profiting off of “the MAJORITIES LOSS” and answer your own questions..

  • http://realitybasedbob.sayanythingblog.com/ realitybasedbob

    North Dakota oil production is outpacing the ability to efficiently move
    the product to market, causing drillers to take deep price cuts

    So…a shrinking/limited supply lowers price?
    What would the hand say?

    • Caeslinger

      It’s a glut of oil, not a limited supply, and less demand for that supply because oil from the Eagle Ford is and going to be more readily available in the future, therefore contracts are made with those companies first.

      Seems so pointless to point that out to you.

  • Dallas

    So a pipeline that wouldn’t/couldn’t be operational for four years is driving down theprice paid for North Dakota crude.  Think your last line got it right when you mentioned …”oil traders’>

    Most of the oild from Canada that would pass through the line would be sold to China.  What does that have to do with price of North Dakota crude?  Dallas

    • http://sayanythingblog.com Rob

      Investors don’t react.  They’re proactive.  It can take months, even years, from the time a well is drilled to when it’s producing oil for the market.

      Investors are turning from ND oil now in light of a bottleneck in infrastructure later.  That you don’t understand how this stuff works doesn’t mean they’re wrong.

      Most of the oild from Canada that would pass through the line would be sold to China.  What does that have to do with price of North Dakota crude?

      Oil is a global market.  Whether the oil is sold to Americans or the Chinese or the Brazilians, it has an impact on price.

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