It's this price gap that had provided the railroaders' initial opportunity. In April, the discount on mid-continental crudes like West Texas Intermediate began to narrow in relation to world prices. Signs of cooling are already in evidence.
"I don't know exactly when that's going to be, but our perspective is this market will be overserved."
"There's eventually going to be an oversupply as these cars are delivered and as these pipelines come online," said Kenney on his company's Oct. (GMT), the railcar lessor that owns the second-largest tank car fleet in North America. Oil production that's landlocked today will have a surfeit of transportation choices, and pipelines will almost always prove cheaper than rail.Īnother voice of caution has been Brian Kenney, chief executive of Yet as those tank cars arrive, the pipeline companies will be adding another million barrels-a-day worth of capacity. The last-reported backlog of 58,910 tank cars, tallied by the Railway Supply Institute, an industry association, should by then be able to handle about three million of those barrels, by Long's reckoning. By 2016, according to industry and government forecasts, daily production of domestic crude will rise by 3.4 million barrels. "What's in the order book is probably enough to handle all the expected increase in crude production in North America-or more," says Stephens rail-equipment analyst Justin Long. But by 2016 that need will be more than met. Oil finds in places such as North Dakota (above) have strained pipeline transport, creating the need for more trains.