HomeBlogLack of Infrastructure in Permian Basin Contributing to Price Differences

Lack of Infrastructure in Permian Basin Contributing to Price Differences

Current pipeline infrastructure throughout the Permian Basin is insufficient in handling the recently increased production of crude oil in the area. Prices have fallen as a result of this inability to transport the crude product to refineries. Although the price gap has increased between Western Texas crude and that from Cushing, Oklahoma in recent years, new developments have now caused it to jump significantly. However, several infrastructure projects are in the process of being completed, meaning the gap should decrease before long.

Recent reports conducted by the EIA peg August oil production from the area at nearly 1.7 million bbl/d. This is an increase of approximately 300,000 bbl/d from 12 months ago. Recent outages at refineries located around the Permian Basin and the Texas Gulf Coast has thus lowered the demand for the area’s crude production, causing the downward pressure on price.

There is some precedence for the drop. In 2012, barrel prices reached what at the time was a record low due to an exceeded pipeline takeaway capacity. As a solution, a section of the Longhorn pipeline was re-purposed in order to move the oil from the basin to Houston. In August, WTI pricing at the basin fell to $17.50 less per barrel compared to Cushing, which has set the new record. This may prompt similar changes to the Longhorn Pipeline solution of 2012. In fact, many expansions are already underway, with the first expected to be operational very soon. By early 2015, new infrastructure will allow the basin to supply crude as far south as Corpus Christi, thus helping to eliminate the current issues and price gap.

JD Fields Construction Group

JD Fields Construction Group

Prior to founding J D Fields & Company, Jerry Fields gained decades of experience in construction products and piling applications managing equipment rentals, material sales, and product operations. Coupled with his oil and gas experience, Jerry built a rock solid foundation of industry knowledge and relationships that allowed him and his partners to start the company in 1985. Incorporated in Houston, Texas, JDF quickly diversified into multiple construction markets and applications. Today, it is a premiere international source for natural gas pipe and piling products. Strategically positioned at the Port of Houston corridor, our flagship stocking facility has 40 acres of laydown area with steel processing and fabrication capabilities. We carry more than 50,000 tons of pipe and piling inventory throughout the states to serve North America, Canada, Mexico, the Caribbean and other international markets.

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