Western Railroad Discussion > Price of Oil Impact on Rail Traffic

With exploration slowing down what is being reported regarding changes in traffic levels of supplies such as sand, pipe, et al.

Steel operation in Pueblo cutting back on seamless pipe production. Plant uses rail for inbound scrap and outbound finished product. Plant is a significant producer of CWR and other steel products that is not currently impacted. A interesting aside is Company, headquartered in London, is Russian.

http://www.krdo.com/news/evraz-announces-pueblo-layoffs-blames-declining-oil-prices/30972556

No doubt only temporary as oil prices will go back up to previous and higher levels at some point.

Don G

The Saudi's have seen the U.S. regain the title of "World's largest oil producer", and gain market share. They don't like that, being oil is all the Saudi's have for power exertion in the geopolitical world. So, they are pumping oil like mad to flood the market, undercut and put many U.S. companies out of business. In doing so, they will regain their #1 title of oil producer, and have more control of the market and price. But many U.S. producers will keep pumping to pay off their high debt, so this struggle will take some time...

A Saudi prince was recently quoted as saying that "we won't be seeing $100 (per barrel) oil again, not for a long time." The Saudi's realize that once oil gets to a certain price level, those nations with more difficult oil available for extraction (the U.S.) suddenly will have a reason to pump oil if the price is high enough. That undercuts the Saudi's. The Saudi's won't have that happen. The Saudi's can pump far more oil than we can at a much, much lower price.

Add to this the financial needs of the Saudi's to sustain their huge public subsidies for their own population, plus fund subversive wars against their arch enemy (IRAN), and they need lots of money. They can only have that if they control the market.

Finally, the Saudi's are sitting on almost $900 billion in cash reserves. They have estimated that running U.S. companies out of the drilling and pumping business will cost them about $250 billion in lost revenue. It's a price they're willing to pay.

Long story short, I doubt the Pueblo plant will be needing those workers back anytime soon, at least for oil pipe production. The Saudi's are going to win this game.



Edited 2 time(s). Last edit at 01/29/15 11:56 by coach.

While the Saudis would like to curtail the US oil production under they are smart enough to know that it won't
stop and at best is only a short term solution against the US oil. The wells in the US will not be capped
and abandoned, once oil prices come back up so do all the exploration and less profitable wells. Keep in mind slow
down of pumping will occur, but almost none of the producers have even mentioned shutting off the production.

In fact there was a article posted just a week ago about how even at the current prices forecasters were seeing
a 15% increase in production this year in the US. I'm not 100% on the percentage but it was around that number.

Now the UK oil fields are another matter where big time layoffs have already hit and there is talk of halting
production on some of the oil platforms.

The Saudis are doing this in response to try and kill off their arch enemy Iran which is very heavily involved
with all the issues in Yemen, Syria, Iraq and even in Africa. Oil is all Iran has and the Saudis will do anything
they can to make sure Iran makes no money from their oil.

Watching a report on BBC the other day the Saudis think that at the current prices Iran is loosing money and
hemorrhaging money big time. This is the Saudis end game they need and want to kill the regime in Iran they could
care less and would much rather not harm the US economy. Even more so in this day and age when they are more and
more surrounded by enemies who will stop at nothing to see them go down. The US is still their main allies.

Kris

Nobody has solid numbers yet, but there are some hints.

Pipe and frac sand will probably drift downward in loadings, but many low lift (cheap to extract) wells will probably keep pumping and requiring sand etc to continue. High cost wells will probably be shut in when they need re-frac.

But, consumers will buy more cars which means more rail-hauled auto components and assembled cars. They will have more spending money with $2 gas (crude hauled by rail), so they'll buy more stuff (clothing, ATVs, home remodeling, lumber, etc) and maybe more houses.

=============

The investment firm Blackstone is raising money for a distressed drilling firm buyout fund. They're buying the debt of really stressed drillers, and may end up exchanging debt for oil wells, leases on undrilled property, or even whole companies. Analysts are abuzz about which firms may be in need of ready cash, and have good assets to swap.

That's part of the back story of a TO exchange the other day about the bad things which happen to firms which borrow money and find they can't pay it back. The bankruptcy or reorganization authority gives the creditors control of the firm.

The frac sand suppliers are already reacting hastily. Reports are many thousands of cars for frac sand are going to storage, and three plants that were slated for opening in 2015 are now abandoned.

As with everything oil, the up and down roller coaster ride continues.

PGR94 Wrote:
-------------------------------------------------------
> The frac sand suppliers are already reacting
> hastily. Reports are many thousands of cars for
> frac sand are going to storage, and three plants
> that were slated for opening in 2015 are now
> abandoned.
>
> As with everything oil, the up and down roller
> coaster ride continues.

What three plants are those??


Allen