Do you know where America keeps its oil? The real answer is, “A good many places,” but a substantial amount of it ends up in Cushing, Oklahoma, which is the country’s main trading hub for crude. And that hub could overflow by next month.
For the past seven weeks, according to a recent report from The Star, the United States has been producing and importing an average of one million more barrels of oil per day than it consumes. Fed in part by the booming business on the North Dakota Bakken shale and an influx of Canadian tar sands, U.S. crude supplies are currently at an 80-year high.
If this trend continues, says Ed Morse, head of commodities research at CitiBank, the price of oil (currently hovering around $50 per barrel) could plummet to $20/bbl in the near future.
“The fact of the matter is we are running out of storage capacity in the U.S.,” he said at a recent symposium at the Council on Foreign Relations in New York.
How is that possible? Well, because there is finite space to fit it all. The U.S. Energy Department reports that Cushing’s oil tanks can hold approximately 85 million barrels of oil. According to Genscape, a market data provider that measures Cushing’s storage levels two times per week, those tanks are currently more than two-thirds full and could reach capacity by mid-April.
Hillary Stevenson, who manages storage, pipeline and refinery monitoring for Genscape, told The Star that crude is filling Cushing’s tanks at “the highest rate we have ever seen.”
This oil glut has affected the price of oil, which was at $107/bbl last June. Per gallon, the average price of gasoline in America is now at $2.44, more than a dollar cheaper than it was in March 2014.
At the same time that oil is getting cheaper, the price of renewables is also going down. Solar is now at grid parity in 50 percent of the countries surveyed by Deutsche Bank, and the National Bank of Abu Dabi admitted in a recent report that even if oil hits $10/bbl, it won’t be enough to compete with solar power.