Publications: Notes at the Margin

The "B-to-B Crude Spread"; OPEC's Coming Kodak Moment (October 7, 2013)


This issue of Notes at the Margin covers two subjects. We begin by summarizing our analysis of the “B-to-B Crude Spread” (Brent to Bakken). As discussed in the September 2013 Petroleum Economics Monthly, the spot price of Bakken crude is being determined today by product price movements in New York Harbor. Indeed, Bakken prices closely parallel Brent prices in that respect. We expect this trend to continue because the US Atlantic Coast market is the now the best outlet for Bakken. Thus Brent and Bakken follow the lead of New York products, while bidding by East Coast refiners sets the Bakken price.


This issue also discusses OPEC’s future. Today, the organization seems headed toward repeating the faux pas Kodak made fifteen years ago when it disregarded the digital imaging revolution. Although that firm has managed to emerge from bankruptcy, it is a now a very small company no longer in the film or film-processing business. By 2020, OPEC could find itself in the same boat after world demand for OPEC oil shrinks dramatically.


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