Alaska Pipeline Shutdown Has Immediate Impact on Oil Prices

BP (BP), ConocoPhillips (COP) and Exxon Mobil (XOM) have cut their oil production from Alaska's Prudhoe Bay field by 95% after a leak was discovered in the Trans-Alaska Pipeline. No one is certain how long the leak will take to fix. It appears to be in a concrete casing along the pipeline at the North Slope pumping station. Alyeska Pipeline Service, the partnership among the oil firms that handles the pipeline's operation, made the announcement over the weekend.

The news sent crude oil prices higher by over 2% to nearly $90. Traders are concerned because the pipeline carries about 15% of U.S. oil output.

It's not clear whether the leak will have an immediate impact on U.S. crude reserves, which may be large enough to offset any loss of oil from the North Slope -- for now.

The Alaska Pipeline is rarely mentioned as a factor that affects the price of oil. Recent debate has centered on increased demand in rapidly growing nations like China and the refusal of OPEC to raise output. Crude prices can also be impacted by weather, especially in the Gulf of Mexico, which is sometimes plagued by hurricanes. But the hurricane season has already come and gone. Political instability in some large oil-producing nations is a more acute issue. Iraq, Iran, Venezuela, and Nigeria are among the ten largest oil producers in the world based on reserves. Rebels in Nigeria have disrupted oil operations in that country, and the political situation in the other countries is constantly open to question.

A pipeline break may raise crude prices, but it also shows how unpredictable events can quickly change perceptions of oil supply and demand.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum

33 Comments

Filter by:
jjcmdude

Please go to Transgas.com, then call your reps and ask why the U.S.Gov is not pushing this project big time,Coal to gas. lots of jobs to be had here.

February 12 2011 at 1:13 PM Report abuse rate up rate down Reply
hughjazoul53

This is utter Bull Crap, two months ago they said gas would go up to 5 dollars a gallon by 2012 and now this magical oil leak gets the ball rolling for these price gouging profit hogs !! They really and truly believe we are freeking idiots and will believe and pay whatever they tell us too !! screw this ,it is time the public steps in and puts an end to the slimeball oil profiteers and the asinine speculators on Wall Street !!Hell ,these Bull Crap artists make plenty of money at 40.00 a barrel so when they try to convince us that oil is up to 90.00 a barrel or higher ,they are LYING because it is all in the speculation of prices not the reality !! So ,folks,we need to put a stop to this earlier than last time and don't let these CARPET-BAGGERS GET A ROLLING START !!!!

January 10 2011 at 7:45 PM Report abuse +1 rate up rate down Reply
georgekrisko

The oil Companies can "Always" find excuses for raising the price of gasoline.

January 10 2011 at 7:27 PM Report abuse +1 rate up rate down Reply
yankeedoug1121

the oil from this pipeline don't go to the U.S. so why do the people here have to pay more? besides these filthy rich oil companys and the governments are are lieing and have huge profits and should take better care to insure thes things don't happen.7.7 billion exxon-mobils first quarter profits when the price was at 2.40 a gallon so why do they get away with this ? last did you people know at $25 dollars a barrel the oil companys have a $360 million dollar profit per year can someone tell me why it needs to cost more than $25 dollars a barrel. no you can't it's whats wrong with this world and it's governments GREED!

January 10 2011 at 7:03 PM Report abuse +2 rate up rate down Reply
1 reply to yankeedoug1121's comment
tonyhuynhtwo

Wow I don't know where you get you're numbers from but I'll assume they're right for argument's sake. I'll throw some real numbers at you. The United States uses 20 Million barrels of oil (includes gas and other petrol products) there are 365 days in a year, which means the U.S. uses 7.3 billion barrels of oil a year (365*20Million=7.3Billion).

That means if the oil companies are making 360 million dollars of profit a year they're only making five cents of profit for every barrel of oil they sell (7.3Billion/360Million=.049). Making five cents of profit on a 42 gallon barrel of oil doesn't sound like gouging to me. Those are your numbers dude.

January 10 2011 at 7:33 PM Report abuse rate up rate down Reply
tonyhuynhtwo

Comments like these, are the reason we need to make economics a mandatory subject during high school.

1. Savvy commodity traders in New York, on the NYMEX are the ones that make the serious cash from these kinds of disruptions.

2. Record profits are the results of record demand for oil. Can anybody guess what country is starting to buy more cars in the US. I went to China sixteen years ago and there were only fifteen cars in my families affluent. The same thing can be said about a lot of developing countries.

3. Does anybody here have any idea how hard and expensive it is to pump crude oil from a deposit that is usually a mile or deeper in the ground; transport a heavy and toxic product to a refinery located across the country; refine the oil into gasoline and other petroleum products through several cycles of distillation; and then transport gasoline to gas stations all across the country. You get all this for three dollars and some change per gallon which includes tax, and you're still claiming you're getting ripped off. Milk is more expensive per gallon and all the farmer had to do was feed the cow, milk it, pasteurize the milk, and send it to their local grocers.

4. Would anybody here run a pizza shop and only charge based on the cost's that went into the pizza, of course not. How would you feel if you're neighbors called you a Damn Crook, for taking home a paycheck.

5. If you want to blame anybody for the high cost of gasoline blame God for making oil scarce, hard and expensive to collect and distill, and making everybody use so much of it without realizing it's value.

January 10 2011 at 7:02 PM Report abuse -1 rate up rate down Reply
4 replies to tonyhuynhtwo's comment
jimmysg46

what a crock!! There's a surplus of oil. Bend over America!

January 10 2011 at 6:40 PM Report abuse +2 rate up rate down Reply
Terry

I'm sure the leak will last until they've made all the money they think the already suffering public can pay before completely breaking down. Damn Crooks!!!!! Everyone of the!!!!

January 10 2011 at 6:29 PM Report abuse +2 rate up rate down Reply
cokeups1

The real reason is GREED. Or possibly the fact that two polar bears are fighting over a single salmon hundreds of miles away from the pipeline leak. Yet the oil companies report RECORD profits??? Is someone donating money to the oil companies in the form of charity?? Could be...

January 10 2011 at 5:59 PM Report abuse +2 rate up rate down Reply
Steven

Why bother with an excuse? they been shafting us for years and didn't need an excuse. If there ever was going to be an economic recovery this kind robbery at the pump will bring it to a halt!

January 10 2011 at 5:42 PM Report abuse +4 rate up rate down Reply
meistro45

hows that drilly oily stuff workin out for ya?

January 10 2011 at 5:42 PM Report abuse +1 rate up rate down Reply