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Ohio Utica Shale

Group offers a look into today's higher gasoline prices

By Bob Downing Published: February 26, 2013

From the Texas-based Consumer Energy Alliance: 

From: David Holt,
President, Consumer Energy Alliance

RE: The Petroleum Bottleneck


Anyone who has sat in traffic understands the importance of good roads. A four-lane highway leaves plenty of room to drive, but merge down to two lanes and you have a rush hour bottleneck. Look at your gas gauge while idling and you become even more frustrated that you are paying a high price at the pump.

EIA.gov reported Monday "the average U.S. retail price for regular motor gasoline is up about 45 cents per gallon since the start of 2013, reaching $3.75 per gallon on February 18. The rise in gasoline prices is partly due to higher crude oil prices."

Explaining High Prices

More oil is being produced but worldwide demand continues to climb due to pressure from fast rising Chinese and Indian markets. To the north, Canada is consistently producing more oil than can be physically transported to markets, resulting in a discount that has reached as much as $60 a barrel. Here at home, because of horizontal drilling and advancements in hydraulic fracturing, the United States is on pace to overtake Saudi Arabia as the world's top oil producer. With all this oil, why aren't gasoline prices dropping?

Boom to Bottlenec
k

Oil from Western Canada trades at a dramatic discount compared to its overseas counterparts in the Middle East but a lack of infrastructure is keeping it from reaching American refineries and in turn the American motorist. Whether it is development in the Bakken formation in North Dakota or Canadian oil imported from Alberta, the roads to American refineries are jammed.

A recent report from the Energy Information Administration points out that several new pipeline projects need to be completed before there is a significant decrease in U.S. refinery utilization of higher cost light, sweet crude imports.

From EIA.gov: "During the next two years an additional 1,190,000 bbl/d of pipeline capacity for delivering crude oil from Canada and the midcontinent to Cushing is planned, but this is balanced by 1,150,000 bbl/d of planned pipeline capacity additions to deliver crude oil from Cushing to the Gulf Coast. In addition, about 830,000 bbl/d of new pipeline capacity is planned to move crude oil directly from the Permian Basin to the Gulf Coast, avoiding the congested Midwest. If this capacity is constructed and fully utilized, waterborne imports to the U.S. Gulf Coast, particularly of light sweet crude oil, could drop significantly."

What the EIA report doesn’t discuss is the fact that the North American crude supplies that could move through these pipelines will be substantially cheaper than the waterborne imports that they will replace – which will place significant downward pressure on the price at the pump.

In an editorial endorsing Keystone XL construction, USA Today notes because of global competition and market access constraints, it is easier for Canada to ship their oil abroad than it is to sell it to the United States. Add a new lane for oil to travel south and you begin to ease the backup.

USA Today Editorial: "At a time of rising global competition for energy resources, the pipeline would bring reliable new oil supplies to a U.S. that still imports 40% of its crude, 7.6 million barrels a day last year. And 40% of those imports come from OPEC nations such as Venezuela, Iraq and Nigeria. Keystone is expected to supply 830,000 million barrels a day, a key step toward the long-sought goal of North American energy independence, which suddenly seems attainable."

Build It

The United States needs to back its production boom with an infrastructure boom. The two must keep pace with each other or else oil will bottleneck by the barrel. Adding new capacity by completing the Keystone XL pipeline will help make N
orth American energy self-sufficiency and lower gasoline prices, to borrow from USA Today: “attainable.”

Learn more at www.BuildKXLNow.org.
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Utica and Marcellus shale web sites

Ohio Department of Natural Resources' Division of Oil and Gas Resources Management State agency Web site.

ODNR Division of Oil and Gas Resources Management. State drilling permits. List is updated weekly.

ODNR Division of Geological Survey.

Ohio Environmental Protection Agency.

Ohio State University Extension.

Ohio Farm Bureau.

Ohio Oil and Gas Association, a Granville-based group that represents 1,500 Ohio energy-related companies.

Ohio Oil & Gas Energy Education Program.

Energy In Depth, a trade group.

Marcellus and Utica Shale Resource Center by Ohio law firm Bricker & Eckler.

Utica Shale, a compilation of Utica shale activities.

Landman Report Card, a site that looks at companies involved in gas and oil leases.FracFocus, a compilation of chemicals used in fracking individual wells as reported voluntarily by some drillers.

Chesapeake Energy Corp,the Oklahoma-based firm is the No. 1 driller in Ohio.

Rig Count Interactive Map by Baker Hughes, an energy services company.

Shale Sheet Fracking, a Youngstown Vindicator blog.

National Geographic's The Great Shale Rush.

The Ohio Environmental Council, a statewide eco-group based in Columbus.

Buckeye Forest Council.

Earthjustice, a national eco-group.

Stop Fracking Ohio.

People's Oil and Gas Collaborative-Ohio, a grass-roots group in Northeast Ohio.

Concerned Citizens of Medina County, a grass-roots group.

No Frack Ohio, a Columbus-based grass-roots group.

Fracking: Gas Drilling's Environmental Threat by ProPublica, an online journalism site.

Penn State Marcellus Center.

Pipeline, blog from Pittsburgh Post-Gazette on Marcellus shale drilling.

Allegheny Front, environmental public radio for Western Pennsylvania.