Western Railroad Discussion > US crude oil exports may be a big plus for rail

Reuters has an article today about BP's successful export program of sending US oil to Asia.  The program involves rail and pipe to ports, then ship, and ship to ship transfers, with an end in various Asian countries.  The recent OPEC cap is expected to make relatively more expensive US crude oil competitive due to lower transportation costs and the price to time continuum. (That continuum currently has oil scheduled for delivery six months out cost more than oil for delivery this month.)

Asian countries, including Japan and South Korea are currently highly dependent on Persian Gulf sourced crude. That may change if the caps hold.


US exported crude oil

 

I thought the US had a restriction on the export of US produced crude oil?

Ted Curphey
Ontario, OR

The article mentions that the restriction was lifted about a year ago. We used to ship oil to Japan before World War II.  They just found a new huge oil supply in west Texas recently that could be tapped to ship oil out.

Bruce Stikkers
St. Joseph, IL

Yes on the west Texas sourcing.

It also offers another possibility to send Bakken oil west to Pacific export terminals. Either by pipe or by rail. Although costs are higher in the Bakken now.

So what happens when you find new customers to a product? Golly, if demand rises and the supply stays the same then the price of the product goes up. Railroads use diesel fuel so their costs will go up. It may take a while for the economics to balance out. You know the oil companies want to sell oil where there is a shortage at a higher price. Otherwise the oil stays here creating a surplus driving prices down.

I suspect that if oil for export goes by rail most of it would go to the Texas Gulf Coast.  They are already set up to do this.  They aren't on the west coast that I know of...


Allen

The recent protests about the Dakota Access pipeline in N Dakota have stopped it's compleation at least while Obama is President. That means N Dakota Crude by Rail will contine for a while. Trump will stop it according to his rehetoric, so the Dakota Access pipeline will be eventually completed. That will stop a lot of CBR moves to the East. Depending on it's reach and capacity, if the new Dakota pipeline cannot reach all wells, and the ones it does reach fulfill Eastern crude needs, the remaining crude producers may very well have to go west to get rid of the oil they are pumping. So there may be a small market there. From what I understand, N Dakota and other fracking wells are not long lived; they might play out in 5-10 years, maybe sooner. If this is true, makes you wonder how long the Dakota Access pipeline can be profitable, and how long crude oil from N Dakota by any transport means will survive. At least with rail transport, you can start it and stop it on rather short notice, depending on your rail rates and or contract. Lackawanna484, your input please.

gee I wonder if some parts of the world would like to buy oil from someone who doesn't hate their guts!!

Oil in the Bakken is believed to have a huge range of extraction costs. Some early innovators can produce oil on cheap leases for 30% the cost of a late arrived with an expensive lease on marginal property.

It's very much a property by property review. Deals that looked great at $130 oil will strangle you at 45.

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