Booming oil inventories in Catoosa, while East Coast price differences persist

An article in Bloombergbusinessweek (September 27, 2012) describes growing oil stocks in Catoosa, Oklahoma where oil generated in the Dakotas come to wait. A shortage of pipeline capacity to the East Coast means that prices in the East continue to remain high even as oil inventories grow. Some hedge fund traders are shipping oil via barge to gain in the price spread. But other pipelines are trying all other means of transport including reversing the direction of oil flow to gain outbound capacity. Even within the oil reservoirs, purchases are for specific blends – which means that matching the demand mix by mixing the appropriate supplies is a key role for the oil storage companies. Given differences in the quality of oil generated in Dakota vs that imported into the US, will refining capacity keep up with supply if pipe capacity increases ? Should the shift from pipe to barge or pipe to truck, and the consequent risk of contamination due to accidents weighed against the environmental cost of the new pipeline in judging their benefit ?

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About aviyer2010

Professor
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