Crude oil pipeline constraints: A tale of two shales

Permian and Williston Basins are both experiencing takeaway pipeline bottlenecks. The price of Bakken sweet crude in Williston is still cointegrating with the national West Texas Intermediate (WTI) benchmark and downstream gasoline market while the Midland crude price in Permian Basin is not. The Midland price only reintegrated with WTI as well as regional gasoline price after the takeaway bottleneck is alleviated. This is because of the rail system developed in the Williston Basin that allows Bakken crude to reach other trading hubs and downstream markets even when pipeline bottlenecks occur. Blocking the constructions of pipelines will not prevent the flow of oil because more oil will be moved by trucks, railways, and barges. These shipping modes are more expensive and are not as safe and efficient as pipelines.

Automated summary

Both Permian and Williston Basins are facing pipeline bottlenecks. The price of Bakken sweet crude in Williston is still connected to the national WTI benchmark and downstream gasoline market, while the Midland crude price in Permian Basin is not. The Midland price only reconnects with WTI and regional gasoline price after the alleviation of the takeaway bottleneck. This is due to the rail system developed in the Williston Basin, which allows Bakken crude to reach other trading hubs and downstream markets during pipeline bottlenecks. Blocking pipeline constructions will not stop the flow of oil, as more oil will be transported by trucks, railways, and barges. These modes of shipping are more expensive and less safe and efficient than pipelines.