The Association of American Railroads released its weekly report today on US rail traffic. For the week ending April 13, US railroads shipped 17,913 carloads of crude oil, an increase of 51.2% compared to the same week last year. Year-to-date, more than 200,000 carloads of oil products have moved by rail, which is a 56.4% increase over last year, and more than double the 99,890 carloads of oil shipped in 2011 over the same period (see chart above).
America’s shale oil revolution has been very good for US railroads, and is just one of hundreds of examples of how shale prosperity is spreading across the country, generating benefits for: a) individuals like oil field photographer Renae Mitchell, b) landowners in North Dakota, Texas, Pennsylvania, and Wisconsin, who are receiving millions of dollars in royalty payments for oil, gas and fracking sand, c) the thousands of workers who are being hired for well-paying oil field jobs in Texas and North Dakota, and d) entire industries like the railroad business. The increased shipments of oil by rail, have helped offset some of the decline in rail shipments of coal, and have contributed to bringing year-to-date rail traffic in 2012 above last year’s traffic by almost 1%.
As the WSJ reported recently,
Welcome to the revival of the Railroad Age. North America’s major freight railroads are in the midst of a building boom unlike anything since the industry’s Gilded Age heyday in the 19th century—this year pouring $14 billion into rail yards, refueling stations, additional track. With enhanced speed and efficiency, rail is fast becoming a dominant player in the nation’s commercial transport system and a vital cog in its economic recovery.
Oil nearly always travels below ground—by pipeline. Unlike pipelines, which travel between two fixed points, trains can transport the oil in many more directions. They also let producers go where the demand is—taking advantage of spreads of as much as $25 a barrel in markets pipelines can’t reach.
Until recently, “crude by rail” was just an experiment. But by November [of last year], big oil players had carved out a plan here [in North Dakota], dooming a new pipeline project in favor of a dozen rail-loading sheds. By year’s end, more oil was moving out of North Dakota by rail than by pipeline.
Update: In the just-released video below “Why We Put Oil on Trains,” Motley Fool contributor Aimee Duffy explains what started this trend, which companies it affects, and why producers in plays like North Dakota’s Bakken Shale may want to stick to shipping via rail for a longer time than some analysts think.