Investors in the rail industry lately have measured their excitement by the increasing number of carloads of crude oil being shipped from the Bakken oil fields in North Dakota to refineries.
Crude oil shipments in the first nine months of 2014 amounted to about 362,000 carloads — more than double that seen the first nine months of 2012, according to the Association of American Railroads.
Yet the recent plunge in oil prices has chewed away at the stock prices of the major rail lines, as investors fear cuts in oil production could be at hand.
Rail executives say they aren’t dependent just on one industry. They have responded to the share price declines by reminding investors that crude oil is but one of many booming sectors that support rail. What’s more, they argue that rail — along with American drivers — has been celebrating the savings at the gas pump.
CSX Corp. announced last week its fuel costs in the fourth quarter decreased 12 percent from the year-ago quarter almost exclusively on a 49-cent drop in the per-gallon price of fuel. The Florida-based Class I carrier, with rail lines through Pittsburgh and much of the eastern United States, consumed 5.6 percent more fuel, yet saved $63 million directly attributed to the price decline.
“From any indication that we see, it’s a positive experience for the American taxpayer, for the American economy,” Clarence Gooden, CSX chief sales and marketing officer, told investors during the company’s earnings call. “So I think lower crude oil prices is very positive for our economy and very positive for CSX.”
Also positive for CSX were shipments of crude oil to East Coast refineries, as well as sand and chemicals to shale well sites. Railroads have particularly benefited from the fracking boom given the lack of pipeline infrastructure — its main competitor in moving oil and gas to market.
Energy-related carloads now make up nearly half of CSX’s industrial shipments and factored into its record annual revenue of $12.7 billion in 2014.
However, asked what would happen if shale production evaporated, Mr. Gooden downplayed its role and pointed out that crude oil by rail is less than 2 percent of the company’s business. Fuel costs, meanwhile, make up 15 to 20 percent of its annual expenses.