Politics of Oil Prices

by Chidem Kurdas

Oil from North Dakota is selling at a record discount, according to a March 1^st news item in the local paper, the Bismarck Tribune.   By contrast, here in New York gasoline prices are near record highs. Between North Dakota and New York are thousands of miles but more crucially standing between us is a gigantic entity, the federal government.

With North Dakota’s Bakken and Three Forks shale formations producing at a rip roaring rate, the issue is getting the oil to refineries and from refineries to population centers. The Bismarck Tribune article quotes the State Mineral Resources Director, who said: “prices for North Dakota sweet crude generally mirrored West Texas Intermediate prices last year but began widening in January when President Barack Obama temporarily halted the $7 billion Canada-to-Texas Keystone XL pipeline, which would have carried 100,000 barrels of crude daily from North Dakota and Montana.”

Presidential obstruction of Keystone XL is one factor. The producers are getting around the lack of pipeline by transporting some of the crude to Louisiana via rail. But that doesn’t much help northeasters like me. There’s this federal law called the Jones Act, which was in the news in 2010 after the BP oil rig disaster in the Gulf of Mexico.