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August 17, 2012

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A couple of weeks ago I read in a rail-related forum that some refineries on the east coast are getting crude oil from North Dakota via tanker cars, given the lack of pipeline capacity. It's uncommon and not particularly efficient for crude to be shipped via rail, but without enough pipelines it's the only choice.

You're right about the rail cars. In fact, the United States has run out of rail capacity to move crude oil.

The bottleneck is temporary: production has already ramped up. But moving oil by rail is nonetheless expensive.

That said, the quote in the NYT article still doesn't seem to make any sense. Am I missing something obvious?

Sounds temporary anyway, right? The spread between WTI and Brent is still there, there's still oil piling up at Cushing. Somebody's going to build pipelines....

Agreed. First the railcars will come on-line, and eventually a pipeline.

The big food fight will be over allowing exports, which I oppose.

Why? Assuming you kept the stuff on-shore, it's just going to keep world prices a bit higher and thus (presumably) tempt some Canadian crude to go elsewhere directly rather than through our pipes.

Good question. Let's take the conversation over to this post: I wrote about the topic in a bit more detail.

It might answer your query; if not, let's talk over there.

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