Gas prices vary based on oil locale

ByABC News
March 21, 2012, 8:55 PM

— -- Abundant oil from North Dakota and Canada has yielded the largest disparities in gas prices in at least several years, pushing per-gallon prices in the Rockies and parts of the Midwest nearly a dollar lower than high-cost states such as California.

Crude oil production has been rising briskly in North Dakota and Canada, but there aren't enough pipelines to transport it to Gulf Coast refineries. That leaves surpluses that have slashed North Dakota and Canadian prices, benefiting mid-Continent states that can more easily use the oil because they're closer.

Meanwhile, two Pennsylvania refineries recently closed, driving up East Coast gas prices.

"There's more diversity in the price of gasoline now" than ever, says Tom Kloza, chief analyst for the Oil Price Information Service.

The average retail price of gasoline was $3.45 in Wyoming Wednesday, the lowest in the country, compared with $4.49 in Hawaii and $4.35 in California, the states with the highest prices, according to AAA. The U.S. average was $3.86.

North Dakota overtook California as the third-largest oil-producing state in December and is on pace to pass Alaska within months.

But pipeline construction hasn't kept pace with the oil bounty, forcing some oil companies to ship by rail, says analyst Aaron Brady of IHS CERA. New pipelines could arrive in two to three years. "The frustration has been the delays and the uncertainty," says Harold Hamm, chief executive of Continental Resources, North Dakota's top oil producer.

A separate pipeline shortage is slowing deliveries from hubs in Cushing, Okla., to the Gulf. That's creating a surplus that's cutting the price of the benchmark oil, West Texas Intermediate, in the USA's midsection but constraining supplies and raising prices elsewhere.

The result: a hodgepodge of prices across the U.S., with WTI trading at prices 14% below East Coast oil and North Dakota crude 14% below WTI.

TransCanada's Keystone pipeline would help the Dakota bottleneck, but President Obama has temporarily halted it on environmental concerns, drawing GOP criticism. Obama is to speak in Cushing on Thursday, where a related pipeline project is expected to ease congestion there.