Western Railroad Discussion > KCS: Managing crude oil rail traffic is becoming more complicated

The Wall Street Journal has an article on supply chain management, and notes crude by rail remains in the cross hairs.  With the international price of oil, and many domestic US prices about the same, the cost of rail is a growing problem.  That has made the scheduling and shipping of crude by rail a challenge.

The given wisdom is that it costs about $3 a barrel to ship oil from Nigeria or Angola to the east coast of the US, and about $6 to ship from the iranian Gulf or Azerbaijan area.  It costs $11 to $13 a barrel to ship from North Dakota.  So, the metronome like shipping to Phillips in Linden, PBF in Reybold etc has become much more difficult to predict. The three trains every 36 hours in some cases has become one or sometimes two every 24 hours.

All's not lost. Cheaper natural gas will generate a lot more activity in the chemicals and plastics side of the business.  Both are profitable operations.

Subscription: Kansas City Southern expects rough 2016

 

     Three trains every 36 hours is the same as two trains every 24 hours.  

I can see I'm going to have to pay more attention to the futures prices of oil.  Yesterday, May 24th, 
they were about an equal $49 a barrel for WTI and Brent.  

Dennis Gartman said on CNBC Monday that he expected prices to peak in the $50 range.  He claimed
that once the price gets over that, more oil will be released for sale and dormant wells uncapped and
put back into production.  He discounted the probability oil would get to $60.  

All above information is FWIW.

Nick Tharalson,
Marion, IA

dcfbalcoS1 Wrote:
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>      Three trains every 36 hours is the same
> as two trains every 24 hours

But not the same as one every twenty four hours. Also mentioned int he same paragraph 

I don't think business moves fast as Dennis Gartman thinks it does. Business and capital speeding is like moving an ice berg, slow but lots of momentum.