In less than a decade, North America has under gone a massive economic transformation thanks to the boom in the natural gas and oil industries. A recent report from the influential global information company IHS gives some insight into just how big the changes have been in the past six years. According to the IHS, this seismic shift in the global energy landscape gets credit for adding an average of $1,200 of discretionary income to the U.S. families, along with supporting upwards of 1.2 million jobs and contributing $284 billion to the GDP. In Canada, the oil and gas industry currently supports 550,000 jobs across the country and should create close to another 1 million jobs by 2035, according to this article.
With all of this oil close to home, what is the best way to distribute it across North America? Does it make more sense for the oil to be refined more locally and then distributed at that point? For years, North America’s relatively moribund domestic energy industry had little need for new infrastructure. However, that has all changed, and it has changed in a blink of an eye. Energy giant Exxon believes that North America will be exporting 15% of its natural gas and 5% of its oil by 2040. The two main forms of transporting oil and gas from the field to North America’s ports and transportation hubs are through pipelines and via rail or truck. Both forms of product movement have their benefits and their limitations.
Rail and Road
The first thing to point out is that there is already a vast network of rails and road throughout North America. Everyday 42% of our ton/miles of U.S. freight travels by rail, as seen in this article, while trucking freight saw a 3.9% jump in 2012 alone. As far as safety, while train accidents have declined 26% since 2000, they still occur. As we witnessed with Canada’s recent July train disaster, they can create high levels of doubt in the communities that they run through.
As of 2013, there are 409,000 miles of pipelines in the U.S. alone. This vast network of above ground and below ground pipelines carries roughly 17% of all ton/miles of U.S. freight. Pipelines do have some downsides, like higher initial expense; however, their pros generally outweigh the cons. The positives include:
- Dedicated use and cost-effectiveness
- Ability to transport large volumes
- Unaffected by weather and can operate 24-7
- Can reach more isolated oil and gas fields
Of course, as we mentioned, the cost of constructing a pipeline can be quite high, but they do provide less of a risk than rail transport.
In the end, both pipelines and rail/road transportation will continue to play critical roles in supporting the ever-growing North American oil and gas industries as long as they can maintain their feasibility, cost-effectiveness, and ultimately, a high-level of safety.