That is what is happening now to some oil pipelines. Two years ago, getting oil out of the Permian Basin was hard…there wasn’t enough pipeline capacity. Now, there is more capacity than needed. Here is what is causing this:
- Lower oil volumes
- New, expensive pipeline construction
- Pipeline conversions from gas to oil
The result is that transportation rates for oil are declining.
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Meanwhile, oil maintains a steady price hovering around $40 per barrel!