Few other refineries (other than some on the Gulf coast) are configured to handle the product.
That's why Canadian crude prices are collapsing...and why the price of gasoline in the upper midwest is going up.
The only other option for Canadian crude to pipeline export to the Texas gulf coast. The problem is pipeline capacity (that's why some much Canadian oil goes out by train), but even more critically, the pipelines typically offload at the giant Cushing OK storage center...and Cushing is right at 100% storage capacity. (you can't just pump crude straight into a refinery...there a timing mis-match that has to be dealt with via storage).
The Canadians are about to really get squeezed.
Sales have collapsed perhaps, but not prices. We shall see if $30 oil can take the wind out of Canadian real estate, I'll believe it when I see it, the confidence level of Canadians when it comes to housing is extremely high.
[1] http://www.creb.com/Seller_Resources/Housing_Statistics/ [2] http://public.tableau.com/shared/S48Y522MR?:display_count=no
> I'd still expect them to drop significantly more as laid-off oil workers burn through their savings and find themselves unable to pay their mortgage.
One would think so, but real estate seems to be able to often defy both logic and mathematics.
That's not entirely true; by law, there are all kinds of special permissions (with different rules depending on what oil -- both by origin and type -- you are exporting, to whom, and whether or not the export of crude is matched by an in-exchange import of crude [usually, of a different grade, otherwise this wouldn't make any sense]) required to export crude, but its not quite banned.
An awful lot of production capacity has to be sweep out of the North American market (production is actually still going UP!!!).
A lot of small to mid-size operating companies will need to go bankrupt...they're the ones keeping production volumes high. They need the cash to cover interest on the bank notes taken out to drill and frack those wells.
The other wildcard is how quickly Iran can ramp up production. That might be 5-7 years given that their technology base is circa 1979 and will need to be upgraded. But it might happen in as little as 2 years...which would continue to dump crude oil on the world markets.
If Congress would repeal the Carter-era export ban on crude oil, that would go a long way towards re-balancing the North American markets, but that seems to be a low-probability event.
So it could take a while, but eventually it will...it ALWAYS does!
Once the tanks are all full, options for producers will include going bankrupt, smuggling, and... oh, yeah, dumping $100k's on lobbying Congress. I anticipate option 3, even though the warming goons and refiners (bedfellows...) will probably fight it tooth and nail.
North America is close to maxing out storage capacity...possibly within 90 days. We've not been this close to max storage capacity in more than 80 years.
North American crude oil production currently exceeds demand (meaning what we have capacity to refine) by over 1 million barrels a day. All that extra is getting dumped into storage.
And the spread in price between crude oil and gasoline will likely stay large.
The USA can't export crude (by law), but can export refined product (gasoline, diesel, jet fuel, etc).
So there's a finite closed market for crude oil (that's running out of places to store it), but a ready export market for refined product (mostly Central and South America).
Net result: low crude oil prices, high gasoline prices.