What Is The Cost Of Transportation?


The Federal Energy Regulatory Commission regulates the rates charged for interstate transportation services offered by liquid petroleum pipelines. Some states also regulate the rates charged by pipelines for intrastate transportation. A pipeline’s tariff specifies the rates, terms, and conditions that apply for the transportation services offered by a pipeline.

The amount charged to the pipeline’s customer may depend on the amount transported, the distance between receipt and delivery points, and competition to transport products in the market. 

According to the National Academy of Sciences, on average the pipeline’s rate comprises about 2.5 cents of the cost at the pump to buy retail gasoline.

The rates charged by liquid petroleum pipelines are regulated differently than natural gas pipelines.  Natural gas pipeline rates are typically regulated like a traditional monopoly utility.  Because liquid petroleum pipelines face significant competition, they must operate as efficiently as possible and market forces commonly dictate the rates that may be charged and the amount of transportation costs ultimately reflected in the price paid by the retail customer.