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Oil Prices Surge, Retreat in Reaction to Pipeline Damage

Posted: 11/29/2007 - 2:41 PM ET

Oil prices spiked then retreated following damage to a Minnesota pipeline responsible for carrying 14 percent of the imports of domestic crude into the United States.

The multi-conduit Enbridge pipeline, located in northern Minnesota, channels crude oil traveling from Saskatchewan into the area around Chicago.

A fire late on Wednesday, November 28 shut down the entire operation and killed two workers, but before noon on Thursday two of Enbridge's four lines resumed operation with a third undergoing inspection. The fourth line, which sustained the greatest degree of damage, will be shut down for a number of days while repairs are effected.

When operating normally, the Enbridge line transports approximately 1.5 million barrels of crude oil a day accounting for 14 percent of the nation's crude imports, some 7.3 percent of the overall domestic consumption in the United States.

Public perception places greed as the culprit for the climb toward $100 a barrel oil while some analysts cite a tightened situation of supply and demand. Regardless, the $100 mark seems inevitability and would be reached even more quickly in the event of a significant pipeline outage.

With gasoline already hovering near the $3 a gallon mark across the nation, there are real fears that $4 a gallon is in the future for the American public, a price point that will be a gold mine for Wall Street traders and an economic disaster for the average American family.

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