$170.00 Per Barrel of Oil

[Railway Man]

.....Could burn oil shale in a firebox with grates.......??  Does the shale turn into "ashes".....?

No.  It's mostly rock and a little bit oil, kind of like coal in reverse.

RWM

[Modelcar]

.....Could burn oil shale in a firebox with grates.......??  Does the shale turn into "ashes".....?

[CSSHEGEWISCH]

You know, I know of a prime mover that does not need liquid fuels, and can operate of scrap wood, peat, any type of coal, will burn oil shale without messy and expensive conversion, and has a 200 year operational history on the railroads...

Is there any manufacturer in this country capable of building such a device?

[beaulieu]

Where they have to absorb the increase. 

Varies considerably by shipper, lane, and commodity.  And more important, it depends on how efficiently the rail shipper can pass on the rail-transportation cost increase to the consumer of whatever it is that is being shipped by rail.  Probably we'll never know because the point where the rail-transportation cost can no longer be passed onto the consumer is well after the point at which the cost increase in gasoline, diesel fuel, and utilities is so high that the consumer has no money left to purchase anything other than food, gasoline to drive to work, and utilities.

Coal demand is pretty inelastic; people will give up a lot of things before they give up electricity.  So is wheat.  Autos, building materials, consumer electronics, clothes, tires -- those are very elastic.  Corn is too, because mostly it goes into animal feed, ethanol, and corn sweeteners, and when consumers are pressured for money, meat consumption, soda pop consumption, and gasoline consumption declines.

RWM

 

Well said.

Not perhaps well known is that Saudi Arabia is going to construct two of the largest refineries in the world, to supply Gasoline, diesel, and heating oil, to us. Sounds good, until you consider that means that more money will go over there since they will now be processing it too, and it will lock us in since I don't think they will process another countries oil for us.

BTW - Tim Colton says the idea of Aframax product tankers coming into US ports scares him a whole lot more than the LNG tankers.  In case you are wondering who Tim Colton is, see his website here;

Maritime Business Strategies

 

This is also of interest

CIBC Reports 

[benburch]

You know, I know of a prime mover that does not need liquid fuels, and can operate of scrap wood, peat, any type of coal, will burn oil shale without messy and expensive conversion, and has a 200 year operational history on the railroads...

[wallyworld]

Where they have to absorb the increase. 

Varies considerably by shipper, lane, and commodity.  And more important, it depends on how efficiently the rail shipper can pass on the rail-transportation cost increase to the consumer of whatever it is that is being shipped by rail.  Probably we'll never know because the point where the rail-transportation cost can no longer be passed onto the consumer is well after the point at which the cost increase in gasoline, diesel fuel, and utilities is so high that the consumer has no money left to purchase anything other than food, gasoline to drive to work, and utilities.

Coal demand is pretty inelastic; people will give up a lot of things before they give up electricity.  So is wheat.  Autos, building materials, consumer electronics, clothes, tires -- those are very elastic.  Corn is too, because mostly it goes into animal feed, ethanol, and corn sweeteners, and when consumers are pressured for money, meat consumption, soda pop consumption, and gasoline consumption declines.

RWM

 

RWM 

Thanks for the answer and by the answer I infer that container traffic would possibly impacted by decreased demand for consumer goods, which makes sense. It sounds like some shake out may occur indirectly...the stronger lines tied to steady traffic generators that are not dependant on consumer demand for imports will have it somewhat easier. Any predictions or who is in a stronger position traffic wise- to weather this "perfect storm"?

 

 

 

[Railway Man]

Where they have to absorb the increase. 

Varies considerably by shipper, lane, and commodity.  And more important, it depends on how efficiently the rail shipper can pass on the rail-transportation cost increase to the consumer of whatever it is that is being shipped by rail.  Probably we'll never know because the point where the rail-transportation cost can no longer be passed onto the consumer is well after the point at which the cost increase in gasoline, diesel fuel, and utilities is so high that the consumer has no money left to purchase anything other than food, gasoline to drive to work, and utilities.

Coal demand is pretty inelastic; people will give up a lot of things before they give up electricity.  So is wheat.  Autos, building materials, consumer electronics, clothes, tires -- those are very elastic.  Corn is too, because mostly it goes into animal feed, ethanol, and corn sweeteners, and when consumers are pressured for money, meat consumption, soda pop consumption, and gasoline consumption declines.

RWM

[wallyworld]

This was the cost projected as the high end by the Saudi's which they are saying could be reached sometime this year, this projection was mentioned shortly after announncing they would increase production. My question is one that occurred to me after hearing this story...Is there a threshold or tipping point where the cost of oil becomes problematic ( I know it already is to some extent) for Class Ones? Someone whom I cant recall said $150.00..per barrel? Is this correct?

An interesting extension of this situation is pending re-regulation.

What do you mean by "problematic"?  Do you mean "beyond what point is the increase in the price of oil so high it cannot be absorbed by the shipper, and the railroad has to absorb it to retain the shippers' business?"  Or, do you mean, "beyond what point is the increase in the price of oil so high that the shippers go out of business for general reasons, and rail traffic declines anyway"?

Railroads are the least vulnerable of transportation modes for commodities that are not alreadly moving by pipeline, as their sensitivity to the price of oil is 1/2 that of ocean shipping, 1/10 that of trucking, and 1/800 that of airfreight.

RWM   

 

Where they have to absorb the increase. 

[Railway Man]

This was the cost projected as the high end by the Saudi's which they are saying could be reached sometime this year, this projection was mentioned shortly after announncing they would increase production. My question is one that occurred to me after hearing this story...Is there a threshold or tipping point where the cost of oil becomes problematic ( I know it already is to some extent) for Class Ones? Someone whom I cant recall said $150.00..per barrel? Is this correct?

An interesting extension of this situation is pending re-regulation.

What do you mean by "problematic"?  Do you mean "beyond what point is the increase in the price of oil so high it cannot be absorbed by the shipper, and the railroad has to absorb it to retain the shippers' business?"  Or, do you mean, "beyond what point is the increase in the price of oil so high that the shippers go out of business for general reasons, and rail traffic declines anyway"?

Railroads are the least vulnerable of transportation modes for commodities that are not alreadly moving by pipeline, as their sensitivity to the price of oil is 1/2 that of ocean shipping, 1/10 that of trucking, and 1/800 that of airfreight.

RWM   

[dlchambers]

The Ethanol thing is in effect an export tariff on food... great amounts of US corn are being directed to ethanol instead of food, and the world is feeling the effects of it. And we can somewhat plausibly feign that we've been forced into this redirection of corn... if OPEC gave us more oil at lower cost, we'd not need to make ethanol. So the political line is: It's not OUR fault that there's a corn shortage, it's OPEC's fault. (nevermind that we all know that's BS... it's a bargaining point for the US gov't).

Also, on a related topic, Saudi Arabia has reached "peak water" - they consume every last drop of fresh water they produce (mostly by desalination). And as their urban uses increase, less is going toward food production. So the Saudis are actually becoming more dependant on food imports.

We should stop exporting food, they can stop exporting oil, and let's see who flinches first :)

[wallyworld]

I recall seeing somewhere that the class 1s (or at least a couple of them), purchased their fuel at protected price before the current spike in fuel costs. I guess it is sort of the same concept as what Southwest Airlines did. I could be way off on this, but is sounds right to me. Of course those contracts will eventually expire, and then time to deal with the reality.

 Thanks, Im sure the contractural price protections are proprietary as you rightfully suggest, have a definite shelf life. What is interesting in the transportation field is that railroads have the best record of bring down fuel costs which I heard was as high a reduction as 85% over a relatively short term. I suppose as my mother once said, you cant squeeze blood out out of a turnip.It would seem if the oil shale fields in Canada become economically profitable perhaps there is a new commodity to move via rail...in addition to coal.

[csmith9474]

I recall seeing somewhere that the class 1s (or at least a couple of them), purchased their fuel at protected price before the current spike in fuel costs. I guess it is sort of the same concept as what Southwest Airlines did. I could be way off on this, but is sounds right to me. Of course those contracts will eventually expire, and then time to deal with the reality.

[eolafan]

170.00 a barrel for oil?  Pure panic-mongering.   

No doubt two years ago if somebody told you crude would reach $140/barrel you would have said the same thing...now look at what the reality is today!

[sfcouple]

.....The stock market drops {as it did yesterday}, on various reasons in the ecomomic world now...Not just a prediction of $170 oil.  It's probably already factured more increases in price of oil in.....

And on which "party" might be saying this or that about what to do over the "oil" situation, I'd like to bring all the blame games to a stop and have our system of government start {really}, start working together on this really grave problem of energy for our economy....!  Perhaps on a "Manhattan Type Project" on alternative energy....What direction to go....Make up their mind just what to do and start doing it......!!

I second your motion.  

Wayne 

[Modelcar]

.....The stock market drops {as it did yesterday}, on various reasons in the ecomomic world now...Not just a prediction of $170 oil.  It's probably already factored more increases in price of oil in.....

And on which "party" might be saying this or that about what to do over the "oil" situation, I'd like to bring all the blame games to a stop and have our system of government start {really}, start working together on this really grave problem of energy for our economy....!  Perhaps on a "Manhattan Type Project" on alternative energy....What direction to go....Make up their mind just what to do and start doing it......!!

Edit:

I go along with the above suggestion of equal price for grain to the OPEC countries as they are selling oil to the free world.  Oh, if we could only get all the grain producing countries together on something like that.  There must be some important products the free world countries make that the OPEC folks need.....We need leverage against them....and the sooner the better.

[ndbprr]

The same party saying we can't drill our way out of the problem is also saying that OPEC releasing more oil is the answer.  Time to throw every poilitician out of office country wide regardless of party and clean up the mess they have created.  The founding fathers saw government service a chance to give back to the country for the benfits it gave them.  Today's politicians retire millionaires, have a pension system that is funded, get a lifetime guaranteed income and don't care about anything but lining their pockets and then expect us to elect thier hand chosen candidate as a rpelacement.  We need someone to come up with a game plan to clean up the mess.

[TimChgo9]

170.00 a barrel for oil?  Pure panic-mongering.  Look what happened to the stock market yesterday, ostensibly after that prediction was announced.  The market recorded a 350 point drop, fueled by (no pun intended) the above mentioned prediction. 

The Market moves not only on facts, and figures, but also on rumors and predictions.  Since I don't work right now, I don't really drive anywhere unless I have to, and I can stretch a  tank of gas out to 2 weeks, however, my wife has to drive for a living, and her company right now, only reimburses about 25-30% of her fuel expenditures.  Our economy, yes, to some extent, our way of life is being changed, and influenced by outside forces, and yet, we have the resources to bring back some of that control, but the people we put in office to look out for our welfare, and the good of the country, are falling down on the job, and assisting in the mess that is being created.  

The most galling thing about this, is the catch phrase going around "we can't drill our way out of this."  Do these people not understand market forces and supply and demand?  Do they not understand about planning for, and taking care of future needs? I know it will take a few years before any new oil that is drilled for to make it to the pump.. BUT, according to what I have heard and read, the mere fact that we would do something to reduce our dependency on foreign oil, would effect the market, and the price.  In my life time, I have never seen such stupidity out of those we have elected to act as stewards of our country and economy. 

[eolafan]

A fellow club member sent this to me.

Opec sells oil at $136.00 per barrel.

Opec buys U S grain at $7.00 per bushel.

Solution, sell Opec grain for $136.00 per bushel

If they can't affoed it, tough. let them eat thier oil !!!

Dick

Texas Chief

I LOVE THE THOUGHT PROCESS!

[Texas Chief]

A fellow club member sent this to me.

Opec sells oil at $136.00 per barrel.

Opec buys U S grain at $7.00 per bushel.

Solution, sell Opec grain for $136.00 per bushel

If they can't affoed it, tough. let them eat thier oil !!!

Dick

Texas Chief

[wallyworld]

....In my opinion....the price of oil is getting a bit scarry.  If we continue on as we {the world market and world leaders}, have been....it is beginning to see how we'll get to that range of price.  And not too far in the future.

Of course a price like that {and possibly before}, will be causing plenty of trouble in the Free World's economies.....Believe we're seeing trouble in our daily routines right now at each of our locations.

Someone else will have to answer the railroad's issues on it.....

Look at the major automakers in this country.....They already are in real trouble...!

 

I was thinking that among other things the disapearance of the interurban industry that was caused by the arrival of the automobile....are we about to revisit the 19th century? I read an industry report in regards to national security...and the inevitable increase on a reliance upon coal to fuel a conversion to a use of electrical power versus oil....Truth is becoming stranger than fiction. I cannot help but think that re regulation is now out the window and the stringing of wire is going to become a quasi WPA project...

[eolafan]

Yep, there is virtually NOTHING we consume in our daily lives (whether it be a "hard" product or a service) that is not somehow impacted by the cost of fuel to produce it or to transport it to market, and therefore we will ALL be impacted more or less by the cost of a barrel of oil.  The cost has doubled (or more) over the past year or so and that gives me cause to pause and check for a hand in my back pocket pulling paper money out of my wallet...BIG TIME! 

[selector]

I would think the price is hitting the railroads quite hard, but it is pathological to the trucking industry.  The truckers in the lower mainland of BC are really up in arms.  $1000 for a fill-up, and their employers are resisting raising their mileage rates in compensation.  Of course, they'll have to cave, and then you and I will begin to feel the pinch in ways outside of the gas station lineups.  For example, what will a cup of coffee cost before long if you are used to snatching a couple each day at the local counter?  If you decide gas is a better investment, those barristas are going to be sent home.  They'll draw pogey, which means the government will have to shore up those coffers...and dutifully, but sympathetically, pass it on to...thou.

[Modelcar]

....In my opinion....the price of oil is getting a bit scarry.  If we continue on as we {the world market and world leaders}, have been....it is beginning to see how we'll get to that range of price.  And not too far in the future.

Of course a price like that {and possibly before}, will be causing plenty of trouble in the Free World's economies.....Believe we're seeing trouble in our daily routines right now at each of our locations.

Someone else will have to answer the railroad's issues on it.....

Look at the major automakers in this country.....They already are in real trouble...!

[wallyworld]

This was the cost projected as the high end by the Saudi's which they are saying could be reached sometime this year, this projection was mentioned shortly after announncing they would increase production. My question is one that occurred to me after hearing this story...Is there a threshold or tipping point where the cost of oil becomes problematic ( I know it already is to some extent) for Class Ones? Someone whom I cant recall said $150.00..per barrel? Is this correct?

An interesting extension of this situation is pending re-regulation.