Oil on Rails

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Last month in Rails Crossing (subs only) ISA looked at the rails with respect to our ongoing coal investigation.  Turns out the rails may be  solid and conservative investments as derivatives of the U.S. shale oil boom.  The strength of the rail stocks has been remarkable on the heels of coal shipments falling 100 million+ tons in 2012.  Crude being hauled on rails has more than made the difference and will continue to blossom in the years ahead.

First, an introduction to rail tank cars:  RBN Energy.  Rail oil prospects excite Wall Street at Railway Age.  Some standbys suffering, but rail industry has rebounded at Times Online.

“North American rail shipments of crude oil are estimated to have grown by 360,000 barrels per day within the past 12 months to reach 465,000 bpd…”  Financial Post

To this point, oil on rail growth has been driven by the Bakken (Mark Perry).  Statoil leased 1000 rail cars to make the trip to the gulf coast (Statoil).  Bakken oil is going to head east as well (Fuel Fix).

As U.S. oil production booms without the pipeline capacity available for transportation, the higher cost rail option becomes necessary.  Importantly, often the trains take the oil to where it is priced of Brent instead of WTI.

Meanwhile, it’s not just oil.  Frac sands needs to be moved too:  Star Tribune.

Especially in Canada, Rail gains steam as a crude oil mover at Globe and Mail.

Further investigation of the rails is necessary and should be profitable.  Stay tuned!  Do you enjoy Independent Stock Analysis?  Add JJ Butler to your investing toolkit.  For $100 a year, become a member today!

6 thoughts on “Oil on Rails”

  1. Good morning, Mr Butler! I did not go past the first page because of the following quote.

    “The estimated breakeven price is now $ 80 – $ 90/fat (at 7% discounting, which is moderate) for the “average” well in the ground formation.”

    Either the translator is not working or Mr Likvern is lying or too incompetent to be believed…Mr Likevern, was quoting the state government, which has always held steadfast that the average production cost is 50 to $55 pb…

    Those that buy this extremely high break-even point, now have a foundation to minimize the valve of the Bakken Play…

    I shall call this the Likevern Play…

  2. Thanks for the train links! Interesting, six publications and only one, yes volks, only one discusses the economics of trains, plains and pipelines…

    Just another affirmation, that the left does not care about the significant of economics…Thank you, Financial Post, for making a difference.

    Now you know, why King Buffet and BOCO Inc where apposed to the X’tra Large Pipeline…Pipelie

    At 31$ per barrel, the choos-choos do not make long term economic sense…I was even surprised at the cost of pipe-lining…

    I wonder what barging would cost? And whether this is a mode of transportation?

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