Highlights from the 2014 OPIS Supply Summit

October 31, 2014 By

October 30, 2014

by David Hackett

The presentations at this year’s OPIS National Supply Summit reflected the dynamics of petroleum markets in North America. Much of the conversation was on the impact of continuing growth of crude oil production in the Mid Continent. The topics include crude oil pipeline development, crude-by-rail and plenty of discussion on the crude oil export ban. On the products side, a Bob Wimmer of Toyota talked about the outlook for vehicle technology and Tim Felt of Colonial Pipeline discussed expansion issues with OPIS’ Tom Kloza. As usual, United-ICAP’s Walter Zimmerman provided a technical outlook for oil markets that was dynamic and bearish.

Interesting facts from the conference include:

  1. Andy Lipow of Lipow Oil Associates pointed out that North Dakota is producing more crude than Alaska and California combined.
  2. In the crude export debate, the Jones Act is key element. The Jones Act requires that cargo moved from point to point in the U.S. have to be on ships that qualify, generally U.S. built and manned. For example, if crude exports are allowed, refiners in Europe could buy U.S. crude in the Gulf Coast, ship it to Europe, refine the products and bring gasoline back to New York Harbor, at costs lower than East Coast refiners can move crude up from the Gulf Coast on U.S. Flag tankers.
  3. BNSF is going to charge $1,000 per movement of crude oil on cars that don’t meet the latest CPC-1232 standard.
  4. The Jones Act has a strong constituency and is not likely to be changed.
  5. Politicians are keeping quiet about the crude oil export ban issue, waiting to see how things go.
  6. Mark Finley of BP said that the Arab Spring created near record supply disruptions in North Africa and the Middle East. That lost supply was completely offset by the growth in U.S. production.
  7. According to Zimmerman, crude oil prices have room to sink to $50-$60 per barrel. Walter also said that interest rates have bottomed.

 

My presentation, LCFS and Cap & Trade – Is Greenhouse Gas Regulation Coming Soon to a State Near You?, explored the impact of California’s AB 32 regulations on the transportation fuels industry and the prospect of clean fuels and low carbon fuels standards being developed around the country.

The OPIS Supply Summit is always an informative and exciting event. This year we came away with great ideas and a broader grasp on the issues facing the industry.

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