U.S. oil infrastructure needs to expand in the next several years to handle the explosive growth of American crude exports, or put pressure on the price of domestic oil, Reuters reports.
While U.S. capacity to export crude oil is unknown, experts estimate bottlenecks will form in key ports and pipelines when the U.S. is shipping around 3.2 million to 4 million barrels per day (bpd). Shipments recently hit a record 2 million bpd, giving oil companies some leeway before pressure starts mounting.
The U.S. is currently producing 9.5 million bpd with expected annual increases of 800,000 to 1 million bpd.
“Two to three years down the road, if U.S. production continues to grow like current levels, the market will eventually signal that more infrastructure is needed. But I don’t think a lot of those plans are in place right now,” Barclays head of energy markets research Michael Cohen told Reuters.
U.S. crude oil exports are in high demand around globe because of an unusual price advantage it has over the global benchmark for crude oil, Brent Crude, The Wall Street Journal reports.
Brent placed the international average of a barrel of oil at $60.43 Monday afternoon. U.S. crude, based on the West Texas Intermediate benchmark, was trading at $54 a barrel.
The $6.43 difference creates a huge advantage when the cost of shipping oil usually doesn’t hit above a couple dollars a barrel. At a $4 difference, the U.S. can ship oil “anywhere in the world,” Wood Mackenzie oil expert R.T. Dukes told WSJ.
“The export window is wide open,” Société Générale global head of oil research Michael Wittner told WSJ.
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