TY  - JOUR
AU  - Borenstein,Severin
AU  - Kellogg,Ryan
TI  - The Incidence of an Oil Glut: Who Benefits from Cheap Crude Oil in the Midwest?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18127
PY  - 2012
Y2  - June 2012
UR  - http://www.nber.org/papers/w18127
L1  - http://www.nber.org/papers/w18127.pdf
N1  - Author contact info:
Severin Borenstein
Haas School of Business
University of California, Berkeley
Berkeley, CA 94720-1900
Tel: 510/642-3689
E-Mail: borenste@haas.berkeley.edu

Ryan Kellogg
Department of Economics
University of Michigan
238 Lorch Hall
611 Tappan Street
Ann Arbor, MI 48109-1220
Tel: 734/764-2371
Fax: 734/764-2769
E-Mail: kelloggr@umich.edu
M2  - featured in NBER digest on 2012-10-01
AB  - Beginning in early 2011, crude oil production in the U.S. Midwest and Canada surpassed the pipeline capacity to transport it to the Gulf Coast where it could access the world oil market. As a result, the U.S. “benchmark” crude oil price in Cushing, Oklahoma, declined substantially relative to internationally traded oil. In this paper, we study how this development affected prices for refined products, focusing on the markets for motor gasoline and diesel. We find that the relative decrease in Midwest crude oil prices did not pass through to wholesale gasoline and diesel prices. This result is consistent with evidence that the marginal gallon of fuel in the Midwest is still imported from coastal locations. Our findings imply that investments in new pipeline infrastructure between the Midwest and the Gulf Coast, such as the southern segment of the controversial Keystone XL pipeline, will not raise gasoline prices in the Midwest.
ER  -