BNSF’s Crude Oil Shipments Stay Strong, Defy Predictions

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Despite dire predictions that falling oil prices would dry up oil drilling in the Bakken Formation, and drastically cut the number of 100-car oil trains hauled by BNSF, petroleum carloads are holding fairly steady.

Carloads of petroleum as of August 15, 2015 are 321,855 as compared to 339,981 for the same period of 2014. The change is only down 5.33% from last year.

The change in carloads has had minimal impact on BNSF, as carloads of coal and grain are both up, giving the railroad a total increase in carloads of 1.14% over this time last year.

Why the High Number of Carloads?

Carloads of crude oil have held strong because predictions that new wells in the Bakken Formation would be uneconomical below $60 a barrel have been way off base.

The marginal cost to produce a barrel of oil has dropped in recent years, and while the breakeven price varies county by county, with it being as high $77 in McLean County, North Dakota, the North Dakota Department of Mineral Resources notes that it is as low as $30 in McKenzie County, North Dakota, and only $29 a barrel in Dunn County, North Dakota.

You Can Cut Even That in Half

The volume also stays high because the cost to pump oil for existing wells is even cheaper. The Bakken Magazine notes that, “The price at which production from existing wells would be shut-in occurs when the oil prices drop to $15 per barrel.”

The per barrel price of oil from the Bakken Formation sells at a discount as compared to oil from some other areas due to additional shipping costs.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.