I read a news article about the rising price of gasoline being caused by distribution problems of ethanol being shipped to eastern markets where it is to replace MBTE. According to the article railroads might not be able ship enough to meet demand. What I’d like to know is why this might be.Do the freight lines not have enough transport capability ? tank cars? track capacity?oil transfer /storage facilities? locomotives? Manpower? Whatever could the problem be with railroads not being able to transport this material?
Basicly after decades of downsizing and eliminateing excess capacity traffic levels in the past few years have been increasing at a record breaking double digit rate. The railroads can’t add capacity fast enough to keep up. Then when the railroads raise there rates to be able to invest in more capacity the shippers whine and cry to whoever will listen that the railroads are big mean monopolys. Well guess what, railroads are not a monopoly, you can ship just about anything by truck that you can by rail. But it costs a lot more, in many cases prohibitively so.
Railroads, unlike trucks, fully pay for and maintain there own infrastructure (tracks) and capacity improovements are expensive. Adding a second or third main costs $1,000,000+ per mile. If shippers want to ship more freight they are going to have to pay for it. And yes that includes the cost of transporting ethanol (that can’t use pipelines to the distribution facilities due to it’s corrosive qualities). And that caost will no doubt be passed on to the end users at the pump.
For the first time in a long time railroads can afford to turn down the less profitable traffic to make space for more profitable traffic. So some businesses are going to have to find alternatives or cough up more $$$.
And you hit the nail on the head. Railroads need more cars, tracks, yard space (xfer facilities), locomotives and employees.
Enhancing rail capacity is not going over to Wal-Mart and saying I want to buy 100 miles of track, can you deliver it tomorrow.
All parts of the track structure have to be purchased from suppliers that have their own production capacity issues. Steel Rail, Ties - Wood or Concrete, Tie Plates, Rail Fastenings - Steel Spikes or Clips, Ballast, Equipment to lay the rail, spread and tamp the ballast…etc. etc etc.
For year Wall Street has looked upon Basic Heavy Industires (Steel making, railroading, mining etc.) as being archaic and basically not worthy of investment because they were mature and did not have the flash and sizzle of Hi-tech and the Dot.coms. As a consequence the suppliers of all the products that railroads need to purchase have their own capacity issues to overcome if and when the railroads want to increase thier own capacity.
Secondly, increased capacity in the rail system is a long term commitment for increased levels of traffic…will the ethanol traffic be continuing…the real jury is still out on that, even though it now seems that it should.
The hard part also for increasing capacity is the NIMBY’s how say sorry I don’t want anymore trains coming thru town they make noise at my new house built 30 feet from the tracks. Nevermind the tracks were there 70 years before the house they still oppose anything new on it. Just look at all the trouble DM&E is having with Rochestor MN.
Um, folks, ya missed sumpthin’:
Be fore you can haul it, you have to manufacture it. The manufacturing capacity is NOT there. Because what is made is in small amounts, the product is doomed to loose car shipping efficiency methods. If the carloadings are there, the railroads will build the plant to serve the need (it’s been this way for the last 100 years.)…Railroads rarely borrow, they pay for the infrastructure upgrades with revenue from carloadings. There are issues with operating management and planning, but if you give the engineering/ track departments the $$$, they will manage to build it.
In Michigan they are in the process of building four ethanol plants, one of which will be on the RR I work for. There have been many,many hurdles to jump but they are still on track and set to begin loading in sept.
but look what happened in SD UP refused to build the spur up and cost the area 50 jobs and the farmers who much money. The cost was 2million bucks for a indusrty that was going to ship 2K cars a year plus the grain trains in.
UP would build it if they (Baard Energy) paid for it. They wanted it for free. [Capitalism is kinda funny about that[:D]] The other thread beat that point into the ground.
[banghead][banghead][banghead]
ps - In my best W.C. Fields, “There ain’t no such thing as a free lunch!”[;)]
Amen, MC, twice![:)] And I might add that 2,000 cars a year sounds like a lot… but… it’s not enough for bulk car shipping; that’s on the order of 10 cars a day, which is loose car handling (or was last I looked), and ain’t cheap.
My reading indicates that current production capacity for ethanol is about 50% of the demand when MBTE is completely pulled off the market. Can’t figure out how the railroads could fix that. Of course some of the geniuses on this forum have decided that every problem in the US is caused by the BAD railroads.
Sioux City is in Iowa, next state over from SD[:)]
They also ship ethanol in trucks.
Yep, that’s what I read.
The refiners (at least some of them) are going to quit using MBTE because they fear it will result in class actions against them as in asbestos, tobacco, etc.
This will reduce the supply of gasoline and if you think $2.55/gallon is bad - you ain’t seen nothin’ yet. (reduce supply, hold demand constant = price goes up. MBTE is a component of gasoline. Take it out and you have less gasoline.)
The ethanol isn’t ready. The production capcity isn’t there. There aren’t enough tank cars in North America. Here we go.
Got to love the lawyers and their class actions.
As a point of reference Iowa currently can produce 1289 mgal./yr. of Ethanol. I don’t know what the figures are for the other states. There is a map here showing the UP served Ethanol plants in Iowa (and a couple in Minnesota) courtesy of K. C. Schmidt
It is in pdf format.
http://users.dwx.com/~kcschmidt/Maps/UP_iowa.pdf
Most of the Ethanol leaves in trainload or half trainload lots. The plants don’t ship every day, either they store the Ethanol in cars, or they have storage tankage.