“Shale by Rail”

In a previous post we noted the transformation of America’s energy industry by the development of “shale oil” from fields in North Dakota and Texas.  The development of these fields, their size and the technology to reach them was entirely unexpected even by industry experts.  A few years ago the term “peak oil” was on everyone’s lips.  Today, we’re looking at a new gusher that may last a thousand years.

The fact that this development was so unexpected and so fast has meant that the infrastructure to bring the oil and gas to market has lagged.  It has proved to be a boon to railroads, just as coal shipments have slipped.  From OilPrice.com we get this analysis:

If North American infrastructural constraints have yielded one clear winner, it is the railroads. With much of the production increases coming from remote locations in North Dakota and Alberta, there has been a major shortage of pipeline outlets for the glut of crude. Railroads have eagerly rushed to fill the gap in a phenomenon that is rapidly becoming known as “shale by rail.” Crude oil shipments on US Class I railroads have correspondingly increased over 3200% in the past five years. A Class I railroad is defined as a carrier with an operating revenue of more than $433.2 million.  Presently, there are seven such railroads operating in the United States. The American Society of Civil Engineers estimates that freight tonnage will increase 22% by 2035, rising from 12.5 billion tons to 15.3 billion tons.

Rail Carloads of Crude Oil

 

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