Thursday, June 21, 2012

Oil Price Differentials: Caught Between the Sands and the Pipelines

One of oil’s most important characteristics is its fungibility, which means that a barrel of refined oil from Texas is equivalent to one from Saudi Arabia or Nigeria or anywhere else in the world. The global oil machine is built upon this premise – tankers take oil wherever it is needed, and one country pays almost the same as the next for this valuable commodity.

Well, that’s true aside from two factors that can render this equivalency void. In fact, crude oil prices range a fair bit according to the quality of the crude and the challenge of moving it from wellhead to refinery. Those factors are currently wreaking havoc on oil prices in North America: a range of oil qualities and a raft of infrastructure issues are creating record price differentials. And with no solution in sight, we think those differentials are here to stay.

CONTINUE READING

http://www.forbes.com/sites/energysource/2012/06/21/oil-price-differentials-caught-between-the-sands-and-the-pipelines/

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