by The Petroleum Marketers Association of America (PMAA)
The Energy Information Administration (EIA) report late last week predicts a groundbreaking 7.25 million barrels of U.S. crude per day this year. In 2014 the forecast is for 8 million barrels a day. EIA also expects that the price gap between U.S. benchmark West Texas Intermediate and the Brent will shrink from $20 today to $9 in 2014.
The unprecedented growth and volume of U.S crude production is largely due to Bakken and Eagle Ford onshore oil formations in North Dakota and Texas that have had surges because of hydraulic fracturing techniques. The Gulf of Mexico will also see increases this year due to peak performances in deep water projects in the region.
Adequate transportation infrastructure has not kept up with the pace of the growth of U.S. crude production, with many using railroads as a mode to move the fuel. 1.15 million barrels per day of added pipeline capacity from Cushing to the Gulf Coast are planned over the next two years to help alleviate some of the backlog. The costs of moving U.S. crude long distances will prevent much of a drop in gasoline prices. Policy makers need to examine laws that add to the expense of moving fuel with high domestic transportation costs, such as the 1920 Jones Act, which requires merchant shipping between U.S. destinations be conducted by U.S. owned-and-operated vessels which are not always price competitive with foreign markets and may drive refiners to those markets for their crude.