There is no question that trucking is the least efficient way of moving oil. Nevertheless, the oil trucking industry employs well over a million people. Pipelines can move hundreds of thousands of barrels at a time. Trains can move tens of thousands. One truck can move less than 200 barrels per day (insert link on previous blog). So why companies even bother with the trucking method? Why do many companies put such a premium on good trucking as a mode of transportation?
Moving Oil with Pipelines
In the Permian Basin, companies are working around the clock to build and open the Keystone Pipeline. The Keystone Pipeline will be among the biggest in the world, able to transport more than 800,000 barrels of oil per day. There are dozens of pipelines in the Permian Basin area. Drilling companies in West Texas drill about 10 million bbls per day. So, even the largest pipeline (which is not yet operating) would not be able to move a tenth of the total oil per day. There are other means of moving oil; I’ll get to them in a bit.
But it’s important to understand that pipelines can’t possibly move all of the oil. Besides this, it is very difficult to find space on a pipeline. FERC (Federal Energy Regulation Commission) heavily regulates American Pipelines. According to FERC, 90% of pipeline space belongs to “regular shippers.” Regular shippers are companies that have been lucky enough to ship oil on the pipeline for twelve straight months. A pipeline company can then auction off the other 10% of the pipeline to “new shippers,” of which there are consistently over 200.
In the case of Keystone, even if the company that owned it auctioned off 10%, the total amount available is 80,000 bbls per day. FERC only allows New Shippers to use 2.5% at one time. For our purposes, this means that, at most, a New Shipper will only be able to ship 20,000 bbls per day through Keystone. This amount is even less for most other companies and/or pipelines. And that’s if a company can even get on the pipeline in the first place. A New Shipper is chosen by random from the entire pool of potential New Shippers. That means, if there are 200 companies trying to get on the pipeline and you are one of them, you have a 1/200 chance in getting on the pipeline.
Moving Oil with Trains
Trains are responsible for moving only 3% of the total oil amount, and there are a few reason for this. The first is that there are simply less trains available than other means of transportation. A second reason is that trains are bigger PR nightmare. If a pipeline bursts open, it will likely result in a massive spill that contaminates the environment. In fact, environmentalist groups like PETA and Greenpeace are notoriously against the construction of new pipelines.
Trains, however, result in the death of individuals if and when they crash. Sure, a pipeline spill can result in millions of gallons polluting the environment, but it rarely kills anyone. Even if a train only carries 70,000 bbls per load, an accident both contaminates the surrounding environment and results in death. The cleanup for environmental disaster already costs millions. Resolving legal issues surrounding the death of employees costs even more. As cold as it sounds, companies would, generally, rather risk millions in cleanup than fighting PR battles.
Moving Oil with Trucks
While moving oil through pipeline is the most effective, moving it by trucking is the cheapest for smaller companies. Even companies who use pipelines use trucking as a means of transporting oil from one place to another. In many instances, this is just from the drilling point to the pipeline or storage tanks. If a company cannot use the pipeline or train, they may also use trucks as primary transport.
Many companies, therefore, invest in their own trucking fleet for that purpose. There is literally so much oil in West Texas (for example) that companies can’t rely on pipelines and train. They have to rely on trucks. It helps that trucking is the lowest risk. When a truck spills oil, the most it can spill is about 180-190 barrels. When they get in a wreck, it doesn’t always kill people. As a result, insurance on for driving is generally cheaper than other methods.
Even if pipelines were able to move every barrel of oil in the world at the same time, companies would still invest in trucks. Trucks are not just responsible for moving quantities of oil from drill to storage. Companies use trucks for local runs, too. Trucks transport from boats to storage, from pipe to storage, etc. Commercial trucking is essential and necessary to the oil industry.
If you have a trucking fleet in which trucks are resting, you are losing money. Make the most of your fleet by signing with UES Solutions for a fraction of your total costs. We pride ourselves on placing the best drivers for open positions. If you have questions about how to increase the return on your assets, call 281-910-0647. We can fill open positions within two weeks, increase your cash flow, and reduce the effect of asset turnover while nearly eliminating the rate of driver turnover.
Happy driving, companies!
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