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Alternatives to the Strait of Hormuz

Dagobert L. Brito and Eytan Sheshinski

Year: 1998
Volume: Volume19
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-9
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Abstract:
In this paper we study the cost of adding additional capacity to transport oil from Saudi Arabia and Kuwait to the Red Sea. If this capacity is obtained by adding power to the existing pipelines, the cost would increase by approximately 14 cents per barrel, but would require large capital expenditures. If this capacity is obtained by using Drag Reduction Agents, the cost would increase by 25 to 65 cents per barrel with minor capital expenditures. Since Arabian oil is inframarginal, these increased costs should have no impact on the supply of oil.



Decomposing Crude Price Differentials: Domestic Shipping Constraints or the Crude Oil Export Ban?

Mark Agerton and Gregory B. Upton Jr.

Year: 2019
Volume: Volume 40
Number: Number 3
DOI: 10.5547/01956574.40.3.mage
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Abstract:
Over the past decade the primary U.S. crude benchmark, WTI, diverged considerably from its foreign counterpart, Brent, sometimes selling at a steep discount. Some studies pointed to the ban on exporting U.S. crude oil production as the main culprit for this divergence. We find that scarce domestic pipeline capacity explains half to three quarters of the deviation of mid-continent crude oil prices from their long-run relationship with Brent crude. We are unable to find evidence that mismatch between domestic refining configurations and domestic crude characteristics contributed significantly to this deviation. This implies that the short-run deleterious effects of the export ban may have been exaggerated.





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