I am short on time as I am heading to the Alternative Fuels Conference (ACT 2013). I wanted to give the light of day to this article on the growth of Crude by Rail (which I mentioned as a trend back here). This has huge impact on the movement of crude and will likely impact the movement of retail goods. Think about things such as priority of movement on track, where capital spending will go and the locomotive resources.
More to follow. Be ready.. whatever industry you are in you will be affected by this.
A 25 year veteran of the supply chain and logistics industry blogs on all things logistics. Experience in 3PL, automotive and consumer goods logistics help bring a unique insight to this topic
Showing posts with label rail. Show all posts
Showing posts with label rail. Show all posts
Monday, June 24, 2013
Monday, June 3, 2013
Crude By Rail is The New Hot Thing
Many have always said crude by rail was just a "stop gap" until new pipelines are built out to support the new finds of oil all over North America. However, as this article in the WSJ points out (subscription required) Kinder Morgan is canceling a $2Bl pipeline project because West Coast refiners want the crude delivered by rail. Pipelines lock contracts for a long time where rail is far more "variable".
For a while manufacturers and retailers were the beneficiaries of low utilization in rail due to the coal drop off and the switch to natural gas. Then, an odd thing occurred which is crude by rail started and most people thought this was a stop gap to new pipelines which would eventually depress the crude by rail market. However, this new development, and other information I have received, says that the refiners such as Valero and Tesoro value the flexibility that crude by rail brings to them very highly. High enough that they would not meet Kinder Morgan's requests and lead the cancellation of this pipeline.
What does this mean for the average shipper?
For a while manufacturers and retailers were the beneficiaries of low utilization in rail due to the coal drop off and the switch to natural gas. Then, an odd thing occurred which is crude by rail started and most people thought this was a stop gap to new pipelines which would eventually depress the crude by rail market. However, this new development, and other information I have received, says that the refiners such as Valero and Tesoro value the flexibility that crude by rail brings to them very highly. High enough that they would not meet Kinder Morgan's requests and lead the cancellation of this pipeline.
What does this mean for the average shipper?
- Don't expect the lack of coal argument to go far in negotiations - they have found alternatives and it looks to be a very good alternative
- Don't expect the "glut" of North American crude to depress prices very far. One reason why the refiners like this is they can "shut off" the flow much more quickly when prices depress too far.
- Expect a lot of capital investment to go into this segment of rail - and since there is not an infinite pot of money this will mean less investment in other areas of rail.
Tuesday, March 5, 2013
BNSF to Test Natural Gas
Just received a number of alerts about the BNSF testing natural gas. Seems they believe this will be a large opportunity to switch which I fully support.
However, if fuel costs are not adjusted to the shipper then the economics of selecting intermodal over truck will not change. There has to be transparency to this decision and the current dominant fuel cost adjustment mechanism does not do the task well.
However, if fuel costs are not adjusted to the shipper then the economics of selecting intermodal over truck will not change. There has to be transparency to this decision and the current dominant fuel cost adjustment mechanism does not do the task well.
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