Here is interesting look into growing alternate Logistic solution to big $24/BBL discount of WTI/Bakken Crude versus Brent due glut in Cushing from both Canadian & Bakken crude coming in ontop of WTI but limited passage out to Gulf where demand is.
The delays by ignorant environmentalist halting the Canadian Keystone XL pipeline & dropped plans by Energy Transfer & Enterprise Products pipelines due lack shipper commitments are just tip of issues that keep Pipelines from providing answer until ~2013 timeframe for the glut gridlock in Cushing.
But Rail is doing stealth move to capture crude moves which have been limited to less 1% past (due cost/competitiveness vs P/L) to total Rail volumes above 780,000 BPD ~up 15% (although w/out stats full volume is hard track by rail) using unit trains! The largest growth has been in Bakken Crude whose shipments via St James terminal has shot up from 65 MBPD to over 130 MBPD. The Bakken production has grown from tiny producer to over 400 MBD next few years & possibly 1 MM BPD by end decade – increasing outflow above current P/L constraints can accelerate the new production levels sooner.
While the $18-24/BBL discounts on Cushing crudes provide current incentive for rail moves they cost ~$12/Bbl for unit trains so they wont remain competative once the planned P/L projects to Gulf complete in post 2013 time frame.
But dropping $6-12/BBL from discount will restore some sanity to US crude oil market and hopefully catch few of speculating trader types off-guard since they aren’t physical users of oil nor knowledgeable of logistical parameters (here is hoping for max damage to these types at least).
Regards