Oil Pipelines

By: EconomyWatch   Date: 30 June 2010

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Oil pipelines are the safest transportation system used for carrying oil to markets, large reserve facilities or refineries. Not only are they an economical way to deliver oil, oil pipelines can transfer large quantities of crude oil across long distances. Major consumers of oil, such as large industries, power generation plants and airports, are supplied directly through pipelines. Oil pipeline operators monitor them continuously by scrutinizing parameters such as inconsistencies, transfer speed, pipeline leaks and the rate of pressure and flow.

Some of the major oil pipelines of the world are:

  • Petronet, Africa


  • Big Inch, North America


  • Transpetro, Latin America


  • Druzhba, Europe


  • Baku-Tbilisi-Ceyhan pipeline, Asia

    • Politics and Oil Pipelines

    Oil pipelines have always been an issue of concern in the context of geopolitics and international security. An example of disputes that have occurred due to the route of oil pipelines is that between Russia and Ukraine, where pricing and debt issues resulted in Russian gas supplier Gazprom discontinuing supply to Ukraine. Many observers point out that Russia took this aggressive step due to Ukraine’s decision to join NATO (the North Atlantic Treaty Organization).

    Another instance of politics affecting an oil pipeline project is the 2,775 kilometer long Iran-Pakistan-India pipeline. The US government did not support this venture and offered nuclear technology for power generation to India on the condition that the Asian nation does not move ahead with the project.


    Economics and Oil Pipelines

    The cost of transporting oil is one of the major factors influencing oil prices. For example, the transportation of oil from Baku to Ceyhan over a pipeline with a capacity of 600 million barrels per day (mb/d) costs nearly 2.52 cents per barrel. The same pipeline with a capacity of 800 mb/d would cost 2.44 ¢/b.

    Some pipeline operators buy insurance against uninvited events, such as:

    • terrorist activity


    • shutting down of pipelines by governments due to tariffs and politically incited clashes.

    The disruption of pipelines causes loss of revenue. Companies cover these losses by increasing oil prices and passing the burden to consumers. Rising oil prices have an inflationary impact on the economy by causing an increase in the transit costs of commodities.


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