The Incidence of an Oil Glut: Who Benefits from Cheap Crude Oil in the Midwest?
Severin Borenstein and
Ryan Kellogg
No 18127, NBER Working Papers from National Bureau of Economic Research, Inc
Abstract:
Beginning in early 2011, crude oil production in the U.S. Midwest and Canada surpassed the pipeline capacity to transport it to the Gulf Coast where it could access the world oil market. As a result, the U.S. "benchmark" crude oil price in Cushing, Oklahoma, declined substantially relative to internationally traded oil. In this paper, we study how this development affected prices for refined products, focusing on the markets for motor gasoline and diesel. We find that the relative decrease in Midwest crude oil prices did not pass through to wholesale gasoline and diesel prices. This result is consistent with evidence that the marginal gallon of fuel in the Midwest is still imported from coastal locations. Our findings imply that investments in new pipeline infrastructure between the Midwest and the Gulf Coast, such as the southern segment of the controversial Keystone XL pipeline, will not raise gasoline prices in the Midwest.
JEL-codes: L71 L95 Q41 (search for similar items in EconPapers)
Date: 2012-06
New Economics Papers: this item is included in nep-cwa and nep-ene
Note: EEE IO
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Citations: View citations in EconPapers (9)
Published as Severin Borenstein and Ryan Kellogg, 2014. "The Incidence of an Oil Glut: Who Benefits from Cheap Crude Oil in the Midwest?," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 1).
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Journal Article: The Incidence of an Oil Glut: Who Benefits from Cheap Crude Oil in the Midwest? (2014)
Journal Article: The Incidence of an Oil Glut: Who Benefits from Cheap Crude Oil in the Midwest? (2014)
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