Oil price now killing the rail car induistry

Once in high demand, North Dakota oil-by-rail shunned on East Coast 

 

In 2012, Plains All American bought a shuttered Virginia refinery for $300 million to use as a terminal and storage hub, betting that East Coast refiners would need to look beyond their own rail yards to satisfy their thirst for cut-price inland crude in coming years.

Instead, shale production from North Dakota has been shrinking and those refiners have resumed buying imported crude. The 140,000 barrel-per-day rail terminal at Yorktown, Virginia has been sitting idle, according to two sources familiar with its operations.

The most recent weekly report from energy industry intelligence service Genscape reported no traffic at the facility, which the sources said was expected to remain dormant through next month. Refiners have been booking an armada of vessels to carry North Sea and West African crude to U.S. shores, the biggest import binge in years that will all but displace Bakken shale.

Spot shipments of crude by rail have all but vanished. Rail car lease rates have slumped to half what they were a year ago and oil-by-rail traffic has dropped 17 percent in the first few weeks of 2016, according to the latest data from the Association of American Railroads.

 Current monthly lease rates for the newest, safest tank cars have slid to roughly $700 from $1,300 early last year and as high as $2,450 in 2014, according to Tom Williamson, owner of Transportation Consultants.

The older model tank cars, Williamson said, are going for as low as $300 a month. At those prices, the lease payments are not enough to cover the cost of building the cars, Williamson said.