CN, CP Go on Hiring Spree as Oil-By-Rail Shipments Hit New Record
Canadian freight rail companies CN and CP are on a “hiring spree” to keep up with oil-by-rail demand that hit a record 200,000 barrels per day earlier this year and could reach 400,000 barrels this winter, according to fossil analysts GMP FirstEnergy.
The increase in volume reflects the C$30-per-barrel penalty fossil producers have to build into their export price, a differential the industry attributes to transportation bottlenecks and more balanced analysis blames at least in part on the poor quality of tar sands/oil sands crude.
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“The very wide differentials we are seeing in recent weeks are reflective of what in our view is a temporary situation where the need for crude by rail is exceeding the logistical capabilities of the rail companies (CN and CP) to move those volumes. Both CN and CP have been on a hiring spree,” the report states.
“CP has an ample excess supply of diesel locomotives (more than 400 in storage as of year-end 2017) and CN expects to take delivery of ~60 this year, and ~140 in 2019/2020, so we do not expect locomotive availability to be a limiting issue beyond this year,” GMP adds. “Rather, we suspect that room on the rail lines and staffing are the current bottlenecks.”
The analysts expect oil-by-rail demand to level off at 300,000 barrels per day next year.