EIA switches to Brent reference price

For its 2013 Annual Energy Outlook the U.S. Energy Information Administration, or EIA, is switching to Brent crude for its reference oil price, EIA announced in early December. EIA, which publishes information and data on oil production and prices, had been using West Texas Intermediate, or WTI, for its reference price.

High oil production in the United States coupled with transportation bottlenecks in shipping West Texas oil to market through the U.S. pipeline infrastructure have tended to depress WTI prices below Brent prices in recent years, raising questions over the suitability of WTI prices as a proxy for worldwide prices.

“This change was made to better reflect the price refineries pay for imported light, sweet crude oil and takes into account the divergence of WTO prices from those of globally traded benchmark crudes such as Brent,” EIA wrote in its early release overview for the 2013 Energy Outlook. “WTI prices have diverged from other benchmark crude prices because of insufficient pipeline capacity to move crude oil to and from Cushing, Oklahoma, and the growth of midcontinent and Canadian oil production that has overwhelmed the transportation infrastructure needed to move crude from Cushing to the U.S. Gulf of Mexico.”

—Alan Bailey