Follow us on Twitter!
Blog Header Logo
DG&A's Transportation Consulting Blog
Subscribe to this list via RSS Blog posts tagged in tanker cars

The business case for shipping crude oil by rail was outlined in the previous blog. The rapid growth in the production of oil in Canada and the United States coupled with the flexibility and efficiency of shipping crude oil by rail has seen the volumes moving via this mode increase 5000 percent growth rate over the past 5 years. Crude oil by rail has grown from almost zero to eleven percent of the revenue of the class 1 railroads during this period. Two things have had a dramatic impact on this business model. They are the rapid and huge drop in the price of a barrel of oil and the level of derailments that have made this a major safety hazard. This blog will focus on the current economics of moving oil by rail. 

The Cost of Producing Crude Oil

The cost required to lift crude oil and maintain oil wells, equipment, and facilities is called production cost or lifting cost. A Market Realist article published in January 2015 draws information from the EIA’s (Energy Information Administration) 2009 report that shows the production cost of crude oil was ~$12 per barrel for the United States and ~$10 per barrel for the Middle East. But recent consensus says these costs could range from $20 to $25 per barrel.

The Cost of Shipping Crude Oil by Rail

The cost to transport a barrel of crude oil ranges between $10 and $20 depending on the origin and destination locations. It must be kept in mind that some of the major rails in the U.S. and Canada have been adding a $1000 surcharge per tanker car in cases where old DOT-111 cars are used. This adds about $1.50 to the per barrel cost. An article published in the February 2 Toronto Globe & Mail stated that recent developments are casting doubt on the business case for shipping crude oil by rail. Since rail costs are about double the cost of shipping via pipeline, “it is unclear if high costs make shipping by rail a money-making mode of transport for producers.” It should be noted that the above-mentioned breakeven analysis doesn’t reflect the additional costs that will come from the necessary upgrades to improve rail safety (as outlined in the next blog). These improvements are expected to add billions of dollars to shipping costs.

...
Hits: 985
0
Continue reading 0 Comments

Volume of Crude Oil Moving by Rail in the United States and Canada

U.S. crude oil production has risen sharply in recent years, with much of the increased output moving by rail. In 2008, U.S. Class I railroads originated 9,500 carloads of crude oil. In 2013, they originated 407,761 carloads. In the first half of 2014, it was 229,798 carloads. Much of the recent increase in crude oil production has been in North Dakota, where crude oil production rose from an average of 81,000 barrels per day in 2003 to more than one million barrels per day by mid-2014, making it the second-largest oil producing state. Crude oil output in Texas, the top crude oil producing state, was relatively flat from 2003 to 2009, but has skyrocketed since then, exceeding three million barrels per day by mid-2014. Canada ships 3.2 million barrels a day via pipeline and 215,000 barrels a day via rail.

Assuming, for simplicity, that each rail tank car holds about 30,000 gallons (714 barrels) of crude oil, the 229,798 carloads of crude oil originated by U.S. Class I railroads in the first half of 2014 was equivalent to 900,000 barrels per day moving by rail. According to EIA data, total U.S. domestic crude oil production in the first half of 2014 was 8.2 million barrels per day, so the rail share was around 11 percent of the total.

Advantages of Transporting Crude Oil by Rail

Pipelines have traditionally transported most crude oil, but in recent years railroads have become critical players. In addition to the fact that railroads provide transportation capacity in many areas where pipeline capacity is insufficient, railroads offer a number of other advantages for transporting crude oil:

...
Hits: 1552
0
Continue reading 0 Comments

Most Recent Posts

Search


Tag Cloud

David Tuttle Keystone Pipeline broker security UP selling trucking companies Trucking Rotman School of Business Conway dynamic pricing MBA Associates intermodal Horizontal Supply Chain Collaboration Sales Training freight audit freight payment freight audit Training New Hires Driving for Profit Grocery 2014 freight volumes Reshoring home delibery Spanx Canadian truckers Harper Davos speech freight broker freight transportation conference US Auto Sales Canada U.S. trade FuelQuest Doug Nix Transloading Canada Donald Trump Scott Monty freight bid rail safety TMP Worldwide Map-21 e-commerce Canadian freight market Failure US Election KCS CRM freight RFP Global Transportation Hub capacity shortage Tracy Matura driver 360ideaspace Wal-Mart Transplace shipping President Obama coaching Outsourcing Sales Freight Carriers Association of Canada transportation newspaper Canadian Transportation & Logistics Warehousing Whole Foods 2013 Economic Forecast NCC shipper-carrier roundtable hiring process truck driver Leadership 2014 economic forecast Freight Rates Blogging Freight Shuttle System freight payment Global experience Loblaw MPG buying trucking companies Canada's global strategy Muhammad Ali Social Media in Transportation 3PL Training Transcom Fleet Leasing future of freight industry pipelines Crude Oil by Rail Microsoft Deferred Packaging Ferromex Life Lessons Climate Change CSA Adrian Gonzalez Rail autonomous vehicles professional drivers shipping wine truck drivers online shopping CN Rail Infrastructure Canadian economy freight agreements LCV's Freight Matching derailments Toronto LinkedIn Railway Association of Canada freight costs Swift customer engagement Inbound Transportation drones Schneider Logistics Trump Education Celadon Business skills consumer centric Politics Omni Channel TransForce broker bonds Transportation freight transportation US Economy CSX mentoring shipper-carrier contracts NS Derek Singleton Accessorial Charges driver shortages 2014 freight forecast Load broker Success failure entrepreneur 2012 Transportation Business Strategies. Jugaad driverless tanker cars Sales freight rate increases CITA Shipper Pulse Survey economic forecasts for 2012 employee termination APL Twitter Right Shoring CN ShipMax RFP $75000 bond USA Truck Freight Load Boards Truckload LTL Dedicated Contract Carriage CP Rail trucking company acquisitions freight cost savings Yield Improvement Comey marketing Transport Capital Partners (TCP) FCA Distribution Transportation service economy IANA Carriers JB Hunt Crisis management transportation audit fuel surcharge University of Tennessee Freight Recession business start-up NAFTA energy efficiency Facebook Cleveland Cavaliers Amazon Consulting last mile delivery peak season 3PLTL carrier conference Retail transportation Doug Davis Freight contracts US Manufacturing transportation news 2015 Economic Forecast dimensional pricing Rate per Mile Dan Goodwill Driver Shortage NMFC Entrepreneur Werner Search engine optimization EBOR robotics network optimization Bobby Harris shipper-carrier collaboration Business Transformation Strategy financial management Fire Phone freight forwarders solutions provider Shipper Freight Capacity Otto TMS FCPC Freight Management Masters in Logistics Social Media small business Sales Management cheap oil Emergent Strategy Business Strategy Broker BlueGrace Logistics Retail trade Packaging Job satisfaction Management CSA scores freight transportation in 2011 automation FMS New York Times Career Advice the future of transportation Regina home delivery BNSF Stephen Harper Trade Vision FMCSA capacity shortages Canada-U.S. trade agreement YRC Software Advice Transportation Buying Trends Survey Success Surety bond US Housing Market Colilers International bulk shipping Hudsons Bay Company Dedicated Trucking ProMiles routing guide Finance and Transportation

Blog Archives