Soaring oil production is filling trains and keeping railways busy, right in the middle of grain country.
However, Tom Williamson, a railway expert and oil man, says it’s not necessarily going to offer a lot of competition for farmers hoping to see good rail movement of crops.
“I would be concerned, but I would not be overly concerned,” he said in an interview during the Cereals North America conference in Winnipeg Nov. 7. “I absolutely think that it can be handled by the system.”
Many farmers and grain shippers have worried that stymied pipeline expansion will keep increasing the flow of oil by rail on tracks needed by the agriculture industry.
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Oil rail car shipments have in-creased from 6,000 in 2009 to more than 300,000 this year as the shale oil industry expanded.
However, Williamson said railways have enough capacity to haul oil from the Bakken formation in North Dakota, Montana, Saskatchewan and Manitoba and still be able to pull grain from those regions to port.
He said railway capacity has been underused since the recession slashed railway traffic and railroad companies have learned how to efficiently get oil to its destination.
For instance, Burlington Northern is running 90 shuttle trains of oil cars at the moment.
Williamson said the biggest problem for farmers is that agriculture is cyclical, with a mass of supply needing rail movement in the fall, while oil production is steady.
“There will be blips,” he said.
However, some shipping system relief will come when the Panama Canal’s expansion opens and allows cheaper shipping from the U.S. Gulf of Mexico and Atlantic coast ports to Asia.
Williamson said oil shipments by rail have shot up in recent years, but that growth is ending.
“I think that the crude oil movement by rail is probably pretty close to where it’s going to be long term,” said Williamson.
However, he doesn’t expect a big decline of rail oil shipments, even if pipelines such as Keystone XL are approved.
Keystone will allow oil from the Bakken formation and the Alberta oilsands to get to the pipeline hub at Cushing, Oklahoma, but that’s not where most demand is located.
He thinks about half of the Bakken oil will continue to move by rail car to other markets in the eastern and northwestern United States.
The present congested state of grain shipping in the U.S. is mostly due to crops from Texas to the northern Midwest all coming off at once. Railways and other parts of the transportation system can usually circulate equipment, crews and capacity from south to north as harvest progresses, but this year it is happening everywhere at once.
