Analysis by the Energy Information Administration indicated that US rail shipments of crude have been on the decline. This is due to both a weak economic oil environment as well as the opening of new pipelines for crude transportation.
Rail transportation was the way to go when the US shale level of production was greater than the capacity to transport the oil. Rail shipments were faster and more flexible in their transporting abilities, although pricier than other options.
Most rail shipments begin in the Midwest and end up in refineries in either the East, West or Gulf Coast. However, all coastal rail shipments have been declining since October of 2014, where they reached a peak of 928,000 barrels per day. The majority of the decrease in rail shipping was due to the Gulf Coast region, as made evident by the graph below. The Gulf Coast was previously the largest participant of rail shipping, but it has since fallen below the Pacific Coast’s number of rail shipments.
New pipelines that were opened in 2013 expanded transportation capacity and encouraged oil producers and refineries to choose pipeline transportation over rail shipments. Also, refineries began to buy more US oil from 2010 to 2014, as the domestic price of oil was more attractive than international prices. Now, the gap in price between the US and Global oil has diminished, causing refiners to look overseas to purchase oil once again.
Article written by HEI contributor Timothy McNally.