BP's Closing of Pipeline Will Cost You $100.00 This Year!

By Scott Siegel

http://www.beatthegaspump.com

In the next few weeks the cost of gas will go up enough that the average family will find itself paying $100.00 more this year than they would have last week.

The reason for the increase this time is the closing of the Prudhoe Bay pipeline that is owned by BP. The pipeline is being closed because of leaks and conditions that will soon cause leaks along major stretches of the pipeline.

The short term effect of this closure will be a 5 cent to 10 cent increase in the price of gas for most of the United States. The increase could likely be higher on the west coast where 90 per cent of the Alaskan oil is used.

Prudhoe Bay is the largest oil reserve in North America. It produces 2.6 percent of the United States' daily oil supply, approximately 400,000 barrels a day.

BP said on Monday August 7th that they had discovered corrosion so severe that it will have to replace 16 miles of pipeline. This will most likely cause the shutdown to last many months. The exact amount of time that will be needed is not known at this time.

With that news oil prices climbed more than $2.00 per barrel and gasoline futures rose too. Prices on the west coast will be the most dramatically affected. The US government is considering releasing some oil from its emergency reserves to ease the shortage that will occur.

West coast refineries have enough oil stockpiled to last about 2 weeks. After that they will need another source of oil to keep operating.

The US department of Transportation ordered BP to do special inspections after a transit line ruptured in March that spilled 4,800 barrels of oil. BP used an internal inspection method this time as opposed to the external inspections they had been conducting.

The internal inspections found that sections of the pipeline had been reduced by up to 80 percent. The last time BP did an internal inspection was in 1992.

An industry analyst has estimated that it could take two to three months to get oil production back on line. He cautioned, however, that there are no assurances that even when it does get back on line that it will return to current capacity. He said he would not be surprised to see volume losses in the area of 5 to 10 percent. That means that there could be a permanent reduction in output from this situation.

BP has had a number of problems over the years. There have been a number of incidents of leaks and spillage surrounding the pipeline. One analyst remarked that he has been telling his clients the BP really stood for Big Problems.

The bottom line is, certainly for the short term and possibly for the long term, this will be one more situation that will result in a significant increase in the cost of gas.


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Scott Siegel is the author of "Beat The Gas Pump!"

Learn more about saving money and gas at the pump.  Over 130 ways to save and increase fuel economy.

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