The oil tanks in Cushing, Oklahoma, are hitting bottom, with the current inventory at 21.6 million barrels, according to the US Energy Information Administration. This is dangerously close to operational stress levels, which could lead to a tipping point in the oil market.

Impact on the US Oil Market

When Cushing’s reserves get below 20 million, they effectively hit empty, scraping the bottom of the barrel of what is largely unusable sludge. This could lead to strange things happening to the oil market, including price volatility and potential shortages.

The US has become the supplier of last resort for regions of the world that typically get their oil and fuel from the Middle East, leading to a surge in demand for US oil. However, US diesel stocks have recently hit their lowest level since 2003, and gas inventories have been falling, about 5% below where they were a year ago.

Global Implications

The world’s oil market could enter the danger zone within a month, with prices becoming extraordinarily volatile day to day. A minor problem, such as a pipeline leak or refinery fire, could send oil and gas prices significantly higher.

An export ban could help keep Cushing from running dry and threatening to choke up the whole system, but this has little political traction and is fraught with potentially unpleasant side-effects, including higher prices in the long-term.

The other solution is for natural market dynamics to take over, which could get ugly in a hurry. Every time Cushing has neared operational minimums, fuel prices have hit historic highs, and this could happen again in the coming weeks.

Original reporting: KRDO (Colorado Springs metro) — read the source article.