August 2019, Vol. 246, No. 8

Features

Pipeline Constraints, Not Export Ban, Caused Big Price Differentials

By Greg Upton, Assistant Research Professor, LSU Center for Energy Studies and Mark Agerton, Assistant Professor, Department of Agricultural and Resource Economics, University of California, Davis Over the past decade, the primary U.S. crude benchmark, WTI, diverged considerably from its foreign counterpart, Brent, sometimes selling at a steep discount. Some studies pointed to the ban on exporting U.S. crude oil production as the main culprit for this divergence.  However, scarce domestic pipeline capacity explains half to three-quarters of the deviation of mid-continent crude oil prices from their long-term relationship with Brent crude. In other words, internal constraints in the U.S. c

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