Will New OK Pipelines Increase Gas Prices? Producers: No, Refiners: Maybe

• Joe Wertz
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  Joe Wertz was a reporter and managing editor for StateImpact Oklahoma from 2011-2019. He reported on energy and environment issues for national NPR audiences and other national outlets. He previously worked as a managing editor, assistant editor and staff reporter at several major Oklahoma newspapers and studied journalism at the University of Central Oklahoma.

Joe Wertz / StateImpact Oklahoma

At a speech near Cushing last month, President Barack Obama pledged to help speed up the application process for the Keystone Gulf pipeline.

Crude oil production is up, and there’s a glut of oil bottle-necked in Cushing storage tanks.

New pipeline projects — the Keystone Gulf and the Seaway — are in the works to bring the oil from Oklahoma to refineries along the Texas Gulf Coast.

Producers want free-flowing oil, but some refiners say the pipelines might mean higher prices at the gasoline pump.

For a long time, the price of oil in Cushing — which is known as the West Texas Intermediate — was higher than its sweet light sibling, the Brent Crude, which comes from the North Sea.

In recent years, that trend has flipped, with WTI selling for as much as $30 a barrel less than Brent. On Friday, WTI closed at $103.17 a barrel, $19.90 lower than the Brent price of $123.07 a barrel, reports the The Oklahoman’s Adam Wilmoth.

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Refiners like Valero say new piplines could lead to higher gas prices in the mid-continental United States.

That discrepancy is costly.

Mid-continent producers make less money. So does Oklahoma itself. That price difference means the state is losing about $100 million in gross production taxes, Oklahoma Energy Secretary Michael Ming tells the paper.

Mid-continent producers say new pipelines will help close the gap between the two crude prices without increasing gasoline prices.

But refiners like Valero say the price gap is the very reason Oklahoma and the rest of the Mid-continent have such relatively low gasoline prices. If the price of West Texas Intermediate increases, regional pump prices might follow.

“If anything, consumers particularly in the Rocky Mountain region may see prices increase as the price in these regions align with international prices,”  Lorne Stockman, a spokesman for the Washington-based Oil Change International, a group that promotes renewable energy, tells The Oklahoman.