A surge in U.S. production of premium crude oil from shale deposits in the Midwest is helping to hold down world oil prices and has prevented a spike in U.S. gasoline prices this summer, according to an article in the Washington Times.
“The moderation in prices found in a new study by the U.S. Energy Information Administration is the first evidence that increasing U.S. production is having a major influence on global prices,” the article states. “The study found a pronounced price decline since February, when U.S. average gas prices peaked at $3.79 a gallon. The decline in oil and gas prices defied the usual pattern of rising gas prices seen during the spring and summer as the U.S. peak driving season approaches.”
The article says that the agency’s analysis found that the reduction in prices was due to the success of oil producers in the Midwest at moving their crude oil by rail this spring to East Coast refineries, where it was needed to produce the super-refined gasoline blends required for use in the summer.
In the previous two years, with no pipelines built as yet to funnel the oil to either coast, the Midwest crude had been stuck near the wellhead, creating a glut of crude oil in the Midwest while East Coast refineries were forced to import more costly premium crude from sources overseas, driving up the price of summer gasoline, the article states.
“This year, rail and barge connections from the Bakken shale wells in North Dakota made it possible for refineries in Philadelphia to obtain and process the U.S. crude, keeping prices at the pump low and declining to about $3.50 in the past week — significantly below their winter peak,” The Times wrote.
The breakthrough in shipping Midwest crude to the East Coast also is helping to lower global oil prices by reducing U.S. demand for premium crude from overseas, the article states.
To read the Washington Times article, click here.