Many investors assume, incorrectly, that fluctuations in oil & gas prices can significantly impact MLP unit prices. However, the truth is that revenue from MLP assets (the majority of which are pipelines) is generated from a “toll road” model. That is, it doesn’t matter how expensive the commodity shipped is – it only matters how much of it gets shipped. Of course, high (or low) prices can impact the amount shipped – but energy demand has been growing fairly consistently over time.
A good analogy is, unsurprisingly, an actual toll road. It doesn’t matter if 100 Honda Civics use the road or 100 Aston Martins – the same toll is collected and, consequently, the same amount of revenue.
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