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Buffett Bailout? Rail-Based Oil Transit Tumbles To Lowest In Over A Year
It appears time for the Oracle of Omaha to start pressing his bought-and-paid-for Washington well-be-dones as his immensely profitable rail freight business - built on the back of massive deflation-inducing malinvestment in US Shale businesses thanks to ZIRP and QE - is running out of steam. As WSJ reports, in March, oil-train traffic was down 7% on a year-over-year basis amid safety concerns and with lower crude prices, "the extra cost of rail makes it a tougher choice," notes on analyst, adding that the WTI-Brent spread needs to increase "for the economics of crude by rail" to make sense.
As WSJ reports,
The growth in oil-train shipments fueled by the U.S. energy boom has stalled in recent months, dampened by safety problems and low crude prices.
The number of train cars carrying crude and other petroleum products peaked last fall, according to data from the Association of American Railroads, and began edging down. In March, oil-train traffic was down 7% on a year-over-year basis.
Railroads have been a major beneficiary of the U.S. energy boom, as oil companies turned to trains to move crude to refineries from remote oil fields in North Dakota and other areas not served by pipelines. Rail shipments of oil have expanded from 20 million barrels in 2010 to just under 374 million barrels last year, according to the U.S. Energy Information Administration.
About 1.38 million barrels a day of oil and fuels like gasoline rode the rails in March, versus an average of 1.5 million barrels a day in the same period a year ago, according to a Wall Street Journal analysis of the railroad association’s data.
...
The slowdown comes as federal safety experts call for stronger tank cars. On Monday the National Transportation Safety Board recommended an aggressive five-year schedule for phasing out or upgrading older railcars used to haul crude-oil. A string of oil train accidents in recent months have resulted in spills, intense fires and community evacuations. The NTSB said railcars in use today rupture too quickly and aren’t fire-resistant enough.
BNSF Railway Co., which is responsible for about 70% of U.S. oil-train traffic, operated as many as 10 trains a day last year, but is averaging nine a day now, a spokesman said.
Languishing oil prices also make oil-train transportation look too expensive when compared to shipping in foreign oil.
“With lower crude prices, the extra cost of rail makes it a tougher choice,” compared to importing tankers filled with foreign crude, said Sandy Fielden, an analyst with RBN Energy LLC.
Shipping oil across the U.S. on a train can cost from about $6 a barrel to nearly $12, depending on where the oil is pumped and where it’s going, Genscape data show. That mode of transport only makes sense when the price of American crude-oil is significantly cheaper than oil pumped overseas.
At times in recent years, U.S. crude sold for $10 to $20 a barrel less than oil pumped in places like Europe and West Africa. The big differential has made shipping American oil on trains an attractive option, said Colin Halling, an analyst at Genscape. “The wider that spread is, the better it is for the economics of crude by rail,” he said.
In recent weeks, the price gap between U.S. and Brent, the benchmark foreign crude, has narrowed to about $7 a barrel, making some oil-train shipments too costly at this time.
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Hopefully this will mean less train crashes.
Comment redactions Tylers?
Water, gotta' start shipping water to LA by rail!
A perfect example of pricing mechanisms. The CONSUMER sets the price, not the producer..
I would like to ship water to LA. I have 3 springs ready to fill tankers 24/7.....
You know Comrade Brown is just going to tax that incoming water, why bother?
It doesn't matter as long as the seller gets in cut first and this would be a great idea... in about two years, when even SF and Silicon Valley are in pain and we can bend THEM over for a change....
"Languishing oil prices also make oil-train transportation look too expensive when compared to shipping in foreign oil."
hoo cares about Baltic Dry Index?
need
Buffet Bailout Index
I feel like I've been thrown back in time to the Carnegie/Rockefeller era.
No, they knew what they were doing, now not so much....
I am not sure I get this malinvestment meme. The US is producing more oil than ever before and is less dependent on foreign oil. Those foreigne producers are desperately shoving low grade sludge at below market prices into our markets. Not sure why this is supposed to be a good thing while US oil is a bad thing. In the meantime, gold still sucks dicks as an investment the last three years.
and in other news for today -
WASHINGTON, DC – Consumer attitudes toward housing appear to have stalled somewhat amid a recent dip in confidence regarding personal finances and income growth, according to results from Fannie Mae's March 2015 National Housing Survey™. Among those surveyed, the share who expect their personal financial situation to improve over the next year fell to 41 percent last month, while those who said their household income is significantly higher than it was 12 months ago fell to 22 percent. Additionally, the share of respondents who said they would buy a home if they were to move decreased 5 percentage points to 60 percent – a new all-time survey low.
http://www.fanniemae.com/portal/about-us/media/corporate-news/2015/6234....
in early march when this index was lagging the "experts" were all saying early Easter would propel end at end of month -
The Retail Economist-Goldman Sachs (TRE-GS) Weekly Chain Store Sales Index advanced up by 1.1% (seasonally adjusted) compared with its previous week for the period ending on Saturday, April 4. On a year-over-year basis, sales rose by 2.5%, which was a tad slower than the pace of the prior two weeks.
https://mninews.marketnews.com/content/retailecon-gs-text-early-easter-w...
So how does this number 'jive' with the made-up number that claims 'record production'? If we really have record production, where is that oil going? Not by rail!
Production numbers show a slight monthly declines since January but still higher on YoY basis . You might want to update your information more frequently if you are going to try to complain about production levels. US Production levels are still about double 5 year ago levels. If oil returns to $70 then every month will probably show a production increase, again. NG production is up about 7% YoY.
The pipelines have been expanded and flows redirected to take some of the volumes away from the rails.
Keystone NSA cops deflecting ME pipeline noise rather than Canada and US alliance.
I guess getting his pal - Obama to kill the Keystone pipeline just wasnt enough
I would have loved to see that pipeline built just to hurt this old con artist CROOK
Maybe he will keel over with a stroke if that pipline goes through when King Obama is relegated to the scrap pile of history in 2016
"Bloviating Buffet Bailout Blues"... there's a country&western song in there somewhere.
...proving that, frankly, New Yorkers have no idea what Blues is?
Alternately,
Elwood: What kind of music do you usually have here?
Claire: Oh we got both kinds; we got country and western.
POO up + $ up=Tell
if POO pops Brent ~59.75 and WCS (Western Captured Supplier) discount holds <~13fiatscos...
Update: POOP!
"Bitch in the Kitchen" : Choo-choo!
C'mon Tyler(s); seriously bro. You guys have reported here about how theres no place left to store crude in the US, but then you conclude from reduced oil shipments by rail that its because of languishing prices and safety?
If theres a lack of storage capacity, would that not possibly signal an upstream trigger to not ship more oil?
Hello , McFly!
Don't worry, Buffet makes big money right now by selling previously foreclosed homes to the American "middle" class for double the price.