Environment, Education, Energy: Policy to People

Oil Espionage: Traders Spy on Oklahoma Hub With Satellites, Sensors and Infrared Cameras

Photo Illustration: Joe Wertz / StateImpact Oklahoma

The bottleneck of crude stored in Cushing, Okla., has become the country’s “biggest bank vault of oil,” Businessweek‘s Matthew Phillips writes. And it’s only getting bigger.

The clog — which is pushing down the price of West Texas Intermediate crude from Oklahoma, creating a gap with its international rival, Brent — is making traders rich.

Information is everything, and traders are using high-tech extremes to extract data about oil storage and flow from the high-security oil hub. Photographers in helicopters? That’s relatively low-level when it comes to these storage tank spy games, Businessweek reports:

Recently, photographers have started using infrared cameras to peer inside the tanks. The difference in heat can often show where the oil line is.

Aerial photography is common. A bird’s-eye view allows analysts to estimate storage levels by calculating the angle of shadows cast by massive tanks’ floating roofs.

And that’s just the beginning.

A private “energy intelligence” company called Genscape is funding much of the high-tech surveillance, reports Businessweek, whose parent company — Bloomberg — also does their own Cushing surveillance by way of twice-weekly satellite flyovers.

Genscape also places electromagnetic monitors beneath the power lines running into the Cushing tank farms to measure their power usage. This gives them an idea of how much oil is being pumped into and out of Cushing.

The data is gathered and sold to banks, hedge funds and oil traders. Oil companies and tank owners are responding with tall barbed-wire fences, arrays of surveillance cameras and armed guards.

The oil glut in Cushing has created “one of the biggest arbitrage opportunities in recent memory,” Businessweek reports:

Buy oil low in Cushing, and sell it high—just under the price of Brent—to refineries along the Gulf Coast.

But getting the oil out of Cushing and into Texas refineries is the hard part.

Pipelines are being built — and reconfigured — at a frenzied pace, and traders are increasingly turning to other “creative ways” to move cheap oil out of Cushing, Bloomberg reports:

… by any means necessary, using barges (…) fleets of commandeered trucks, and trains, where they can find them. The companies that can pull it off can expect to make money—a lot of it.

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  • Phil Jones

    Yeah. Pipelines are being built like crazy…, except the Keystone XL pipeline.

    • oldnavywc38

      Actually parts of Keystone are under construction (providing a few TEMPORARY jobs) – and completion will NOT change the cost of gasoline much, if any. Just as the war in Libya, where about 1% of US oil came from, had an effect of gas prices due to speculators and for no other reason, completion of the pipeline will have little effect on gas prices. It also doesn’t really matter where the Canadian oil goes (US, China, wherever) since all of the world’s oil that is pumped becomes part of a single pool.

  • eugene v debs

    Only one reason I can think of to build a pipeline to the coast…

  • nicholasmcgill

    A fantastic and informative article, thanks very much.

    • joewertz

      Thanks for reading, Nicholas!

  • Bort

    Why is oil so cheap in Cushing? The Keystone XL pipeline has not been built to carry that Canadian oil to buyers in China. The longer we block that pipeline, the cheaper oil will be in the USA.

    • joewertz

      Oil producers say WTI is so cheap because it’s not able to get to market, which keeps the price depressed.

      • somuchvienna

        Who is saying WTI is cheap in the first place…

        • joewertz

          It’s cheap compared to its primary competitor, Brent. Right now WTI is about $90 per bbl; Brent is selling for about $112.

    • CullenNewsom

      Why in the world would someone ship oil from Alberta to China via Texas / GOM ports?

  • Another resource not mentioned is SIGINT and HUMINT. Genscape (and others) have been hiring former NSA & CIA specialists to conduct traffic analysis and cryptanalysis of communications (internet as well as remote sensing devices). Former Cold War spies are now tracking oil company technicians (and their families) in order to steal valuable cryptographic keys, control system data, and scheduling information. The payoff is simply amazing! These former spies are making 10 times what they made working for the U.S. Government. Welcome to the future my friends.

    • joewertz

      Fascinating, Laura. If you know a good interview subject, please shoot me an email!

      • Wiseacre

        in my browser this says “…If you know a good interview subject, please shoot me // an email!” Interesting place for a line break, there.

        • joewertz

          If you don’t see me post for a few days, look for holes in/around Cushing. ;)

  • maxsteel

    Great article, thanks for the information.

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