Western Railroad Discussion > Oil by rail: not just boom and bust?

Interesting article about the longer-term prospects for the rails to keep growing their oil-based traffic, albeit at a slower pace:

http://www.nytimes.com/reuters/2012/11/04/business/04reuters-railways-oil-northamerica.html?pagewanted=1&_r=0&hp

Joel Gilmore
Fort Worth

let's hope so.

Wow--that last sentence got me--an honest to gosh backhaul in a railroad car. Now that's making some money and utilizing a car! Go after that, BNSF!

There aren't many cars that can do that, other than intermodal flats, reefers, and a few other cars.

The $31 per barrel cost for rail vs $4 a barrel cost for pipeline is a huge premium.

As the article notes, the political snarls on the Keystone and Northern Gateway pipelines help rail position as the --only--alternative to move oil. With US and Canadian oil selling for well under the world (Brent) price for oil, this spread will stick around for a while. That's good for rail.

Other articles I have seen quote more like $8 to $12 per barrel for rail vs. $3 to $4 for pipeline out of the Bakken. I've never seen any article talk about $31 for rail and $8 for pipeline (not $4), though I think that is for oil originating in Canada to the Gulf coast, not Bakken.

Lackawanna484 Wrote:
-------------------------------------------------------
> The $31 per barrel cost for rail vs $4 a barrel
> cost for pipeline is a huge premium.
>
> As the article notes, the political snarls on the
> Keystone and Northern Gateway pipelines help rail
> position as the --only--alternative to move oil.
> With US and Canadian oil selling for well under
> the world (Brent) price for oil, this spread will
> stick around for a while. That's good for rail.

czephyr17 Wrote:
-------------------------------------------------------
> Other articles I have seen quote more like $8 to
> $12 per barrel for rail vs. $3 to $4 for pipeline
> out of the Bakken. I've never seen any article
> talk about $31 for rail and $8 for pipeline (not
> $4), though I think that is for oil originating in
> Canada to the Gulf coast, not Bakken.
>
> Lackawanna484 Wrote:
> --------------------------------------------------
> -----
> > The $31 per barrel cost for rail vs $4 a barrel
> > cost for pipeline is a huge premium.
> >
> > As the article notes, the political snarls on
> the
> > Keystone and Northern Gateway pipelines help
> rail
> > position as the --only--alternative to move
> oil.
> > With US and Canadian oil selling for well under
> > the world (Brent) price for oil, this spread
> will
> > stick around for a while. That's good for rail.


Yes.

The article uses the $31 figure supplied by Southern Pacific oil for their Canadian heavy crude, and contrasts it to the $8 pipeline cost. If there was a pipeline. And, if it could carry the heavy, sticky stuff.

The figures you mention would be representative of the numbers around Bakken crude (much less distance to the Gulf, much easier oil to handle).

I wonder if the Canadians will ever build a refinery up in the great tar sands region, and ship refined gasoline out? That would seem to make more sense than wrestling the oil out of Canada...

Lackawanna484 Wrote:
> I wonder if the Canadians will ever build a
> refinery up in the great tar sands region, and
> ship refined gasoline out? That would seem to
> make more sense than wrestling the oil out of
> Canada...

From most of the reports I have read, the reason for
the pipeline line to Texas or potentially to the
Canadian West Coast is to ship oil OUT of North America,
not to refine and use gas/diesel here!!

In other words, Crank the Price UP!!!!

Mike