The tragic accident in the Quebec town of Lac-Mégantic was the major transportation story of the past week. As of tonight, the death count is at 33 but it will likely reach 50 people when all the bodies are found. In addition, much of the downtown of that town area was destroyed as 72 tanker cars of the Montreal, Maine and Atlantic Railway Ltd., carrying crude oil, caught fire as they came off the tracks.
Rail transportation in Quebec, Canada dates back over a century. The rails have been a key element in the history of commerce in this Canadian province. The railway has been hauling iron ore, pulp and paper and other commodities for many years. But the sharp decline in the United States housing market, as a result of the Great Recession, reduced the demand for Quebec’s lumber. This motivated the MM&A Railroad and others to shift their focus to the movement of crude oil via rail.
The transportation of crude oil via tanker car goes back to the days of John D. Rockefeller. The rail industry is now hauling more crude oil than it did in those days. Trains transported a record 97,135 carloads of crude in the first quarter of 2013. That’s 166 percent more than during the first quarter of 2012 and 922 percent more than the rails handled during all of 2008.
Union Pacific, the largest US railroad, tripled the amount of crude it moved the previous year. BNSF, America’s second largest railroad, is now transporting 650,000 barrels a day versus almost none five years ago. Canadian Pacific Railway expects to haul 70,000 carloads of crude in 2013, up from 500 in 2009.
While moving crude oil by pipeline still costs about half to one-third of what it costs to move it by rail, trains don’t require long term contracts or need to wait for pipelines to be built. While pipes stretch only from point A to point B, refiners can access nearly any market in the United States or Canada by rail. Flexibility and the ability to easily shift delivery markets to maximize revenue, has been encouraging oil companies to increase the leasing of rail cars.
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