As oil prices linger below $35 a barrel, U.S. producers are finding the cost of transporting crude by train just isn’t worth the returns. The low price and ready availability of crude has forced about one-third, or 20,000, of North America’s oil-hauling train cars out of commission, and they’re parked in storage yards or along unused tracks.
The cheapest form of storage—underground salt caverns—can cost 25 cents a barrel each month, while storing crude on railcars costs about 50 cents a barrel and floating storage can cost 75 cents or more. The cost estimates don’t include loading and transportation.
Railcars hold between 500 and 700 barrels of oil, less than a cavern, tank or ship can store.
The use of U.S. railcars to transport large volumes of oil picked up steam a few years ago as a byproduct of the fracking boom. Fields sprung up faster than pipelines could be laid, so producers improvised and shipped their output to market by rail. Companies soon realized railroads offered greater flexibility to transfer oil to whomever offered the best price. Some pipeline companies even joined the rail business, building terminals to load and unload oil. U.S. oil settled Friday at $32.78 a barrel, down nearly 70% from mid-2014.
The plunge in oil prices brought that activity to a halt. Analysts estimate there are now as many as 20,000 tank cars—about one-third of the North American fleet for hauling oil—parked out of the way in storage yards or along unused stretches of tracks in rural areas.