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Bustin' Up Bottlenecks


In a bit of bright news for America’s energy future, the southern portion of the controversial Keystone XL pipeline will be completed by the end of this month, connecting Cushing, Oklahoma with refineries along the Gulf Coast. The pipeline will bust open one of the bigger bottlenecks in America’s energy pipelines, allowing 700,000 barrels of oil per day to flow down to the Texas coast. The Wall Street Journal reports:

Investors, traders and analysts in recent weeks have been focused on the race by pipeline operators to catch up with the oil-output boom in the U.S. For almost three years, U.S. oil prices have been depressed relative to world prices and Europe’s Brent crude contract. That has been due largely to a lack of infrastructure, which has caused barrels to pile up in and around Cushing, Okla., the largest storage hub in the Midwest. […]

“This is going to add to the drain on Cushing quite a bit,” said John Kilduff, founding partner of Again Capital in New York.

Here’s why this is so important: back in February, we wondered whether the shale boom might go bust, not from a lack of recoverable oil and gas (there’s still plenty underground), but because America’s pipeline infrastructure lacked the capacity to transport oil from fields in the Dakotas down to refineries along the Gulf Coast.

This stunted infrastructure wasn’t the result of poor planning. The US has by far the world’s most extensive pipeline network. No one could have predicted the magnitude of the shale boom. But knowing what we do now, failing to shore up these networks would be a big mistake.

Of course, we’re still waiting to hear from the Obama administration on whether the northern half of this pipeline will be built, connecting Cushing with Alberta’s oil sands. The White House decision was expected this fall, but now it looks like the President is kicking the can down the road until sometime early next year. The political and economic rationales still seem pretty clear to us: the pipeline should be built. But even if it isn’t eventually built anytime soon, it’s encouraging to see our own domestic transportation network getting some much needed upgrading.

There’s still plenty of oil out there. Let’s go with the flow.

[Pipeline image courtesy of Shutterstock]

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  • Corlyss

    Friday 4 October 2013 / Hour 3, Block D: Liz Peek, The Fiscal Times, in re: While President Obama continues to tilt for windmills, rising oil and gas production has showered his administration with unexpected benefits. Those producers inadvertently include his arch enemies—the Koch Brothers. How deliciously ironic it is that the oil industry – consistently scorned by this president – has been one of the most potent economic drivers of this recovery, the biggest contributor to an improving balance of payments picture and has provided Obama significant leverage in digging out of his difficulties in the Middle East. President Obama and fellow members of the flat earth society, who many years ago wrote off the future of conventional energy resources, must be stunned. The president has noted more than once that “we are running out of places to drill” and that “we have only 2 percent of the world’s oil reserves.” What a surprise, then, that the U.S. is on track to become the world’s largest oil and gas producer, likely overtaking Russia this year. As noted recently in the Wall Street Journal, because advancements in horizontal drilling and fracking made huge new reserves economic, domestic production of natural gas last year was an all-time high–up 13 percent over the 2010 level, and 27 percent higher than output in 2002. In July, gas production was 56 percent higher than the recent monthly low recorded in September 2005. Similarly, oil output, which had declined steadily since 1970, turned up in 2010, and has increased 27 percent over the past five years, laying to rest the once-popular notion that we are running out of the stuff. That, my friends, is progress. . . .

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