The crude oil hub in Cushing, OK, is larger and grabs the headlines, but don’t you forget about the Patoka hub in south-central Illinois. It plays critically important roles in receiving Western Canadian, Bakken, and other crude, distributing it to a slew of Midwestern refineries, and directing oil south to the Gulf Coast on the Energy Transfer Crude Oil Pipeline to Nederland, TX — and soon on Capline to St. James, LA, when reversed flows on that large-bore pipe begin in early 2022. Better still, there are great stories behind the development of the Patoka storage and distribution hub and how it works. Today, we begin a series on the second-largest crude oil hub in PADD 2 and why, with the upcoming Capline reversal and other changes, the hub is more relevant than ever.
The Cushing hub is, in many ways, the center of the U.S. crude oil universe. It has 94 MMbbl of crude oil storage capacity in 350-plus aboveground tanks, an array of pipelines into and out of Cushing, and a maze of interconnecting pipes within the hub, which help to give owners and operators there degrees of flexibility and optionality unavailable in any other crude oil market center. As if that weren’t enough to establish Cushing’s energy-market cred, prices at the hub serve as the reference price for all of the crude produced in the U.S. — and given the role that U.S. oil has assumed on the global stage, one of the most important determinants of global crude oil pricing. In other words, there’s a book’s-worth of things you should know about Cushing, which is why RBN recently published The Cushing Playbook.
As readers of “the Playbook” know, Cushing started out as a crude oil production and refining center — by one account, as many as 50 small refineries (and tankage to support them) were in operation in or near the town by the 1930s. By the 1960s and ‘70s, most of the refiners had long since been shuttered, but by then Cushing’s central location between Midcontinent oil production, the big refineries along the Gulf Coast, and the emerging refinery centers in the Midwest made it a natural place to build more storage and more inbound and outbound pipelines. Cushing’s central location and robust infrastructure in 1983 led the New York Mercantile Exchange (now CME/NYMEX) to select Cushing as the delivery point for NYMEX’s futures contract for West Texas Intermediate (WTI).
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