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Decomposing Crude Price Differentials: Domestic Shipping Constraints or the Crude Oil Export Ban?

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  • Mark Agerton and Gregory B. Upton Jr.

Abstract

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. We find that scarce domestic pipeline capacity explains half to three quarters of the deviation of mid-continent crude oil prices from their long-run relationship with Brent crude. We are unable to find evidence that mismatch between domestic refining configurations and domestic crude characteristics contributed significantly to this deviation. This implies that the short-run deleterious effects of the export ban may have been exaggerated.

Suggested Citation

  • Mark Agerton and Gregory B. Upton Jr., 2019. "Decomposing Crude Price Differentials: Domestic Shipping Constraints or the Crude Oil Export Ban?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    • Handle: RePEc:aen:journl:ej40-3-agerton
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    Cited by:

    1. Ryan A. Decker & Meagan McCollum & Gregory B. Upton Jr., 2024. "Boom Town Business Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 59(2), pages 627-651.
    2. Unel, Bulent & Upton, Gregory B., 2023. "Oil & gas induced economic fluctuations and self-employment," Labour Economics, Elsevier, vol. 82(C).
    3. Nida Cakir Melek & Michael Plante & Mine Yucel, 2021. "Resource Booms and the Macroeconomy: The Case of U.S. Shale Oil," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 42, pages 307-332, October.
    4. Chatziantoniou, Ioannis & Gabauer, David & Gupta, Rangan, 2023. "Integration and risk transmission in the market for crude oil: New evidence from a time-varying parameter frequency connectedness approach," Resources Policy, Elsevier, vol. 84(C).
    5. Kenneth Rose & Brittany Tarufelli & Gregory B. Upton Jr., 2024. "Retail Electricity Market Restructuring and Retail Rates," The Energy Journal, , vol. 45(1), pages 1-49, January.
    6. Jennifer Rushlow & Paul Bauer, 2021. "How the Removal of a Market Barrier Enhanced Market Efficiency: The Case of WTI and Brent Crude Oil Prices," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 49(1), pages 87-96, March.
    7. Luong, Phat V., 2023. "Crude oil pipeline constraints: A tale of two shales," Resources Policy, Elsevier, vol. 80(C).
    8. Michail Filippidis & George Filis & Georgios Magkonis & Panagiotis Tzouvanas, 2023. "Evaluating robust determinants of the WTI/Brent oil price differential: A dynamic model averaging analysis," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(6), pages 807-825, June.
    9. Ioannis Chatziantoniou & David Gabauer & Rangan Gupta, 2021. "Integration and Risk Transmission in the Market for Crude Oil: A Time-Varying Parameter Frequency Connectedness Approach," Working Papers 202147, University of Pretoria, Department of Economics.
    10. Chatziantoniou, Ioannis & Gabauer, David & Perez de Gracia, Fernando, 2022. "Tail risk connectedness in the refined petroleum market: A first look at the impact of the COVID-19 pandemic," Energy Economics, Elsevier, vol. 111(C).
    11. Mark Agerton & Ben Gilbert & Gregory B. Upton Jr., 2021. "The Economics of Natural Gas Venting, Flaring and Leaking in U.S. Shale: An Agenda for Research and Policy," Working Papers 2021-02, Colorado School of Mines, Division of Economics and Business.
    12. Libo Xu, 2024. "On the WTI-WCS Oil Price Differential," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 52(2), pages 67-77, September.
    13. Alomari, Mohammed & Khoury, Rim El & Mensi, Walid & Vo, Xuan Vinh & Kang, Sang Hoon, 2024. "Extreme downside risk connectedness between green energy and stock markets," Energy, Elsevier, vol. 312(C).
    14. Yanting Chen & Peter R. Hartley & Yihui Lan, 2023. "Temperature, storage, and natural gas futures prices," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(4), pages 549-575, April.
    15. Upton, Gregory B. & Yu, Han, 2021. "Labor demand shocks and earnings and employment differentials: Evidence from the U.S. shale oil & gas boom," Energy Economics, Elsevier, vol. 102(C).
    16. Ruble, Isabella & Powell, John, 2021. "The Brent-WTI spread revisited: A novel approach," The Journal of Economic Asymmetries, Elsevier, vol. 23(C).

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