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Turning Back to Truck and Rail

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According to the Houston Chronicle, many oil producers in the Permian Basin facing a pipeline shortage “are increasingly turning to trucks and rail” to “ship crude oil from the West Texas oil field to refineries and export terminals on the Gulf Coast.”

These shifts are driven by a few factors; firstly, the influx of crude oil in the Permian basin has reached 3.6 million barrels a day. However, the region’s pipeline capacity only accounts for 3.5 million barrels a day. Second, crude oil sells at least $10 more a barrel in South Texas, the Gulf, and various markets outside of West Texas. Additionally, inventories are compiling in West Texas because of the lack of pipeline capacity.

Although trends point to clean energy options, oil and gas are still unstoppable. Due to the new energy boom, oil is going to continue moving in increasing volumes. The answer is not to stop it, but to decipher how to move it when pipelines are full and how to do so safely.

The trends in the West Texas arena point to a return to truck and rail. In September of 2018, Jupiter MLP signed a deal with Vista Proppants and Logistics of Fort Worth to ship West Texas crude by rail from Vista’s location in Pecos. Their plan is to ship around 400,000 barrels a month through 2019 and possibly into 2020, contingent upon the completion of pipeline projects.

This narrative is nothing new to the oil industry. As oil production increases, providers and transporters have been forced to re-evaluate. Pipelines are at capacity or outdated and unsafe, so producers are left with four options for movement: pipeline, truck, rail, and boat. As predicted by Forbes, if new pipelines aren’t built, suppliers will move to rail, especially with shipments coming from Canada.

Currently, 97% of their natural gas and petroleum products are transported by pipeline. However, as those pipelines meet capacity, Canada is beginning to invest more into rail transport. In fact, Canada’s energy regulator announced last summer that they are exporting around 200,000 barrels per day by rail.

A similar climate exists in West Texas; as suppliers vie for pipeline capacity on new pipelines under construction, some are making deals with both rail carriers and trucking companies to transport crude oil from West Texas to other markets. As an industry already under pressure and stress due to a lack of drivers and high demand, this dependence will be difficult to account for. In fact, suppliers are turning to trucking companies located hours away to carry oil from West Texas to South Texas. Matt Nevarez, the director of operations for the Midland trucking company TexStar Crude Transport in Midland, said: “The market spread for what they can sell a barrel for in South Texas versus Midland, it’s huge, so everybody’s wanting to get their oil down there.”

The safety of the move to truck and rail for oil transport is still in question. For instance, increased pollution has to be accounted for. Luke Metzger, the director of the advocacy group Environment Texas, fears that people aren’t aware of the dangers of these increased oil shipments.

Unfortunately, in terms of general safety, pipeline remains the safest transportation option for oil. However, as the industry evolves to its shortcomings, we can only encourage all involved in the trucking industry to exercise caution on all fronts in their new endeavors.

Of course, if you are seeking transit software solutions, you can contact Chorus Logistics. We aim to provide the best value in the industry and strive to cater to your unique needs with our expansive suite of software. To learn more about our products Axlehub, GUARDRAIL Mobile, and Tolltagger or for guidance in selecting a transit software provider, contact us today at 7138991271 or through our contact page.

 

Resources:

https://www.forbes.com/sites/jamesconca/2018/10/11/which-is-safer-for-transporting-crude-oil-rail-truck-pipeline-or-boat/#262ad1b57b23

https://www.houstonchronicle.com/business/energy/article/With-pipelines-full-oil-and-gas-companies-13197758.php

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