Yesterday, as I filled my gas tank in Phoenix, I noticed the cost topped $60. Filling up my car hasn’t cost that much in a long time.
Gas prices are indeed rising. What’s worse—look for prices to get higher this summer. From ABCNews.Com’s article on January 6th, titled “Forecast: 2012 Worst Year For Gas Prices:” (All emphasis in the blockquotes is added).
To the dismay of drivers across the country, 2011 went down in the record books as having the most expensive gasoline average ever, $3.513 for the year, 72 cents per gallon higher than 2010′s yearly average, according to GasBuddy.
Patrick DeHaan, GasBuddy’s senior petroleum analyst, projects that by Memorial Day, the national average will be between $3.86 to $4.13 per gallon, and that prices in 2012 will come close to or set new all-time highs. If that happens, drivers could spend $200 to $300 more for gas this year.
Inflation adjusted data from the Energy Department’s U.S. Energy Information Administration confirmed that 2011 was a record year. The real annual average for a gallon of regular gas last year hit $3.56, up from $2.90 in 2010, according to the EIA. From its data that begins in 1919, the previous record high was in 1981, at $3.45.
Wouldn’t it be nice if we could find ways to keep the costs of gasoline down? Well, one way to do that—lower shipping costs.
(AP) BISMARCK, N.D. — North Dakota oil drillers increasingly will rely on trains to move barrels of crude to market after the Obama administration’s decision to reject plans for a pipeline that would run from Canada to refineries on the Gulf of Mexico, state and industry officials say.
“Pipelines are by far the safest and most economically efficient way to transport oil, but we are left with a limited number of options if pipelines are off the table,” said Tony Clark, chairman of the North Dakota Public Service Commission. “Once the oil is flowing, it has to go somewhere.”
How much would we save if pipelines could carry our oil, instead of trains?
Alison Ritter, a spokeswoman for the state Department of Mineral Resources, said the state’s so-called takeaway capacity is adequate, though producers and the state were counting on the on the Keystone XL to move North Dakota crude.
Shipping crude by pipeline in North Dakota adds up to $1.50 to its cost, compared to $2 or more a barrel for rail shipments, producers say.
“Oil that would have moved by the Keystone XL is now going to shift to rail transportation,” Ritter said.
Boy, it sure would be nice to be a rail shipper, now that the Keystone pipeline—and the thousands of jobs it would take to build it—has been put on hold.
Yep…you guessed it. (My headline gave it away, didn’t it?).
From the AP article:
Mile-long trains laden with North Dakota crude began running in 2008 when the state first reached its shipping capacity with existing pipelines and infrastructure, said Justin Kringstad, director of the North Dakota Pipeline Authority.
Rail shipments now account for about one-quarter of the more than 510,000 barrels produced daily in North Dakota and will increase exponentially with increased oil production and the shortage of pipelines, Kringstad said.
“If the (Keystone XL) is blocked or delayed, we still have to meet our transportation needs,” Kringstad said. “It’s pretty simple.”
BNSF Railway Co. hauls about 75 percent of the oil that currently leaves North Dakota by train, Kringstad said.
The railroad is a unit of billionaire Warren Buffett’s Berkshire Hathaway Inc., and Buffett is a longtime Obama adviser.
Neither BNSF officials nor Buffett at his Berkshire Hathaway office in Omaha, Neb., returned telephone calls from The Associated Press.
Billionaire oilman Harold Hamm, chairman and chief executive officer of Continental Resources Inc., said he believed Buffett had no influence in Obama’s decision to block the pipeline. Instead, he called it a “lucky break” for Buffett.
“Warren is smart and I like his intuition. He is a friend of mine,” Hamm said. “I don’t agree with his political leanings and his liberal outlook on things. But certainly he’s favored by this decision — it’s easy to figure that one out.”
$2 for every barrel shipped by rail from the North Dakota oil fields. Yes, Team Buffett is lucky, indeed.
Multiply 510,000 barrels a day (North Dakota’s current output) X .50 (the added cost per barrel of shipping by rail instead of through a pipeline)…well, I guess we can all absorb a extra quarter-of-a-million dollars a day in added fuel costs. (Looks as if we don’t have much of a choice.)
To be fair, though, only 10% of North Dakota daily output currently goes by rail (see above). However, the pipeline authority rep expects that total to jump “exponentially.” So, for planning purposes, let’s suppose that, eventually, half of North Dakota’s output moves by rail. OK—255,000 barrels X .50 = $127,500 in added fuel costs. Costs that will be passed on to us.
Did anyone in Washington D.C. ask you if you were OK with paying more for gas, so that we could just say no to that icky pipeline? Me neither.
I guess, in the big scheme of things, $127,500 a day isn’t a big deal. According to the Energy Department (see 1st blockquote), each of us is already paying hundreds of dollars more for gas than we were a few years ago. So, why not pay a little bit more?
Keep telling yourself that when you’re pumping gas, as the price meter climbs higher…and higher…and higher.