Thanks Fracking: North Dakota Oil Production Driving Down Gas Prices

Tweet

Written By:
Rob Port

Apr 9, 2012
5:12pm

According to a new study, oil production in North Dakota is driving down gas prices despite a logjam in transportation capacity to bring that oil to market.

New energy analysis supports the distribution of crude oil from North Dakota and Canada to stabilize prices of refined gasoline at the pump, according to Stillwater Associates LLC, an Irvine-based energy and oil consulting firm. Production of crude oil in the Mid Continent is growing but the means of distributing this cheaper crude oil to refineries around the country is limited. …

“The map (http://bit.ly/Hn6pfx) shows the price of WTI on April 5,” explains [Stillwater Associates President David] Hackett, “as well as the spread between WTI and other ‘marker’ crude oils. What is really interesting is the $40 spread between Western Canadian Select crude in Alberta and Alaska North Slope crude on the West Coast. We believe this huge arbitrage will drive investment to move WCS to the West Coast. Similarly, the $31 difference between Bakken and Brent will cause North Dakota crude to move to the refineries on the East Coast.

“Distributing cheaper mid-continent crude oil to the coasts will drive prices at the pump down. Additionally, getting cheaper North Dakota crude going to the east coast may help troubled east coast refineries.”

Put simply, more supply means lower prices.

It’s worth noting that North Dakota oil gets a heavy discount in the market because of the log jam in bringing that oil to market. Were the Keystone pipeline to be built, it would likely mean higher prices for ND-produced oil in that oil producers in the market would have expanded access to markets.

But even with higher prices, the impact on overall fuel prices would be a positive one.

Put simply, hydraulic fracturing in North Dakota is putting oceans of energy on the market. If we could get the federal government to quit roadblocking the Keystone pipeline, the impact of ND oil would be even more profound.