Disclaimer: Other than what I've read in a couple of articles...I know almost nothing about this topic.
Educate me on how this would work, or not...
From what I've read, oil production in the Permian Basin is going gangbusters. However, oil pipelines to pump that out have not kept up. So you have a lot of oil that can't move to market through pipelines.
This article implies the discount for oil that is "stuck" in Midland could grow to $20 a barrel. (there's a term for this stuff...heard it a lot in the context of tar sands in Canada and Keystone...I can't recall the term though)
https://oilprice.com/Energy/Energy-General/Permian-Discount-Could-Rise-To-20-Per-Barrel.html
A semi-tanker can hold 200 barrels.
So, if a person bought 200 barrels of oil in Midland at a $20 discount for what it's worth in "Houston"(?). Drove it 500 miles to Houston and sold it for market rate. Wouldn't they have potentially big profits?
200 barrels x $20 discount = $4,000
- fuel costs of ($3/gallon of diesel for 1000 miles round trip at 5 mpg) -$600
That's $3,400 left to cover truck, labor, overhead, etc. for each trip.
What am I missing?
Educate me on how this would work, or not...
From what I've read, oil production in the Permian Basin is going gangbusters. However, oil pipelines to pump that out have not kept up. So you have a lot of oil that can't move to market through pipelines.
This article implies the discount for oil that is "stuck" in Midland could grow to $20 a barrel. (there's a term for this stuff...heard it a lot in the context of tar sands in Canada and Keystone...I can't recall the term though)
https://oilprice.com/Energy/Energy-General/Permian-Discount-Could-Rise-To-20-Per-Barrel.html
Quote:
The lack of resolution for takeaway capacity will mean the painful discounts that shale producers are starting to see will stick around for a while. "We continue to see Permian oil prices of around $50/bbl in 2Q/3Q 2019 and a discount to Gulf Coast prices of around $19-$22 per bbl in 4Q18-3Q19," Goldman wrote.
A semi-tanker can hold 200 barrels.
Quote:
a single tank trailer only holds about 9,000 gallons or 200 barrels, a little under a third of a rail car.
https://www.forbes.com/sites/jamesconca/2014/04/26/pick-your-poison-for-crude-pipeline-rail-truck-or-boat/#6962ee4917ac
So, if a person bought 200 barrels of oil in Midland at a $20 discount for what it's worth in "Houston"(?). Drove it 500 miles to Houston and sold it for market rate. Wouldn't they have potentially big profits?
200 barrels x $20 discount = $4,000
- fuel costs of ($3/gallon of diesel for 1000 miles round trip at 5 mpg) -$600
That's $3,400 left to cover truck, labor, overhead, etc. for each trip.
What am I missing?