The US has so many oil pipelines, half of which are empty

Unused pipes near Blanco, TX, in 2019. Photo: Eric Gay (AP)

If you’re looking for an oil pipeline, you’re in luck – we’ve got a bunch of extra now. About half of the oil pipelines in the US are unused, energy research firm Wood Mackenzie said in numbers shared with Reuters Thursday. The situation reflects a slump in oil production that kicked off by the pandemic.

Oil production, like many other supply chain functions, is not an exact science; there is usually a push-and-pull dynamic between production and pipelines as supply ebb and flow. In early 2020, when US oil production was still relatively high, somewhere between 30 and 40% of the country’s pipelines was unused, Wood Mackenzie reported. However, the decline in production due to Covid-19, when demand was so low that oil prices briefly fell into negative territory, was so abrupt that the ratio of unused pipelines to oil production is truly extraordinary right now.

Part of this incredible drop is due to the oil boom that preceded the pandemic. Between 2017 and 2020, operators made efforts to build more pipelines as a strong increase in oil production in The Permian Basin of Texas caused transportation bottlenecks and threatened to overwhelm existing infrastructure. This was the icing on the cake of a 15-year rush in US oil production like no other in history.

“The shale boom is unprecedented in size and rate of production growth,” said Lorne Stockman, director at Oil Change International. “Especially in the Permian, as far as I know, there has never been an oil basin or a plain that has grown so quickly and so quickly.”

Another contributing factor to the pipeline building frenzy is the simple fact that Texas likes to encourage oil and gas production and puts very few guardrails in place. “There were no huge regulatory hurdles to overcome to build a pipeline,” Stockman said. “You almost don’t need a permit to build them.”

The phantom network of pipelines has been a concern in the Permian throughout most of the pandemic. Last year the Wall Street Journal published reported that the slowdown in production was bad news for some of the major pipeline companies in the country, which previously had to deal with a huge glut of business. These operators include big names such as Energy Transfer Partners, which owns the Dakota Access Pipeline. The Wood Mackenzie report notes that the Dakota Access Pipeline is only running at 77% of its usual capacity, compared to 100% before the pandemic. Plains All-American Pipeline is another biggie; the company tried (and failed) to build a pipeline this year through a predominantly black neighborhood in Memphis, and is push to replace a California pipeline that shut down in 2015 after a major oil spill.

Pipeline operators and those who support the fossil fuel industry like to use language about what pipelines are like needed to serve the nation; the idea of ​​”public interest” pipelines, Stockman said, is often used in eminent domain cases in which companies try to advocate building pipelines on private land. Licensing agencies often repeat that language when moving projects forward. Meanwhile, pipelines and other fossil fuel infrastructure have been called “critical,” allowing conservative lawmakers to pass extreme policy to protect them from protesters.

But the excess pipelines in the Permian right now show that much of U.S. oil and gas infrastructure was built not out of a noble drive to meet a country’s energy needs, but because fossil fuel companies are looking for the best bang for their buck. .

“Then you see there’s actually overbuild,” Stockman said. “It’s not about meeting demand — it’s about helping companies make more money by making choices about where to send their oil.”

While it’s easy to blame Covid-19 for the sharp decline in fossil fuel production and pipelines lying unused. Even with ommicron, there may also be an expectation that production will pick up again at some point. But the story of US oil production is not so simple.

Global forces like OPEC are keep the reins on production tight to control prices, while US investors – many of whom lost money during the shale boom because the huge amount of oil being produced pushed prices to the bottom – pressure US producers to keep production low. Meanwhile, the global energy transition looms as the world begins to recognize the urgency of stopping the production of fossil fuels. It remains to be seen whether those abandoned Permian pipelines will remain empty — or whether the interests of fossil fuels will get their way and find another way to use them.

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