Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

US Gas Prices May Fluctuate if Canadian Bottleneck Eases

By

Once some Canadian pipeline additions enter into service, the gasoline map for US retail consumers will change.

PrintPRINT
Canadian oil producers may get a better price for crude in the overseas markets because of the glut of oil in the North American market. That, in turn, could reshape the US price market for retail gasoline, AAA said Monday.

AAA spokesman Michael Green told Oilprice there's a bottleneck building up for Canadian crude because of the general increase in North American oil production. "Canadian producers may find higher prices selling crude oil to places like China or Europe than to refineries in the central United States," he said.

The National Energy Board, Canada's independent regulator, announced in early March it approved a request from Enbridge (NYSE:ENB) to reverse the flow of oil through its Line 9 pipeline system. The project involves shifting the pipeline's direction to the East Coast and increasing its volume from 240,000 barrels per day to 300,000 bpd.

Last week, Valero Energy Corp. (NYSE:VLO) said it would source crude oil from Line 9 to feed its refineries in Quebec, a move that would eventually end the provincial dependence on oil from Algeria and other regional suppliers.

Other projects, from TransCanada's (NYSE:TRP) Energy East pipeline to the Northern Gateway for Canada's West Coast could help fuel Canadian Prime Minister Stephen Harper's efforts to bring oil to foreign markets. Currently, nearly all of Canada's oil heads to the United States.

AAA's Green said that once all the Canadian pipeline additions enter into service, it could reshape the gasoline map for US retail consumers. With lower imports of Canadian oil into the US refinery market, the price of West Texas Intermediate, the US benchmark, could increase, which would mean slightly higher gasoline prices for central US consumers, where it's currently the cheapest.

"On the other hand, increased Canadian exports could help to lower the price of Brent and other international grades of crude oil," Green said. "This could help lower costs for US refineries along the East and West Coasts, which often rely on imported oil from overseas."

The US East Coast and West Coast markets typically have gasoline prices higher than the national average. California had the highest state average for the Lower 48 with $3.97 for a gallon of regular unleaded. New York led the East Coast market with $3.76 per gallon. The national average for Monday, according to AAA, was $3.53, relatively unchanged from the previous week.

In general, Green said the increase in North American crude-oil production has been a net benefit for consumers. The increase in gasoline supply sourced from domestic crude has shielded a North American economy that would otherwise be exposed to volatility in overseas markets. Two years ago, he said, the national spring average peaked at $3.94, but with production booming, it shouldn't pass the $3.65 mark this season.

This article was written by Daniel J. Graeber of Oilprice.com.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE