Your Business News
Transporting oil by railcar to increase through 2021
April 16, 2021
Authored by RSM Canada LLP
Kirby W. Houle, CPA, CA shared this article
INSIGHT ARTICLE |
Canadian crude-by-rail exports have rebounded after a nearly 40 per cent drop in 2020, according to the Canada Energy Regulator. Monthly rail volumes increased by approximately 10 per cent in December 2020 to 190,454 barrels per day, but remained well short of December 2019, when volumes shipped reached 347,136 barrels per day.
Overall, Canada’s crude-by-rail exports averaged 172,013 barrels per day last year compared to 280,272 in 2019, but looking at these two averages alone fails to paint an accurate picture of the state of the industry in 2020.
Before the COVID-19 pandemic, export pipeline congestion in Canada had led to steep price discounts for Western Canadian Select crude. As a result, regulators instated curtailments on oil production, with exemptions made for oil that would be exported by rail.
This led to record crude-by-rail export volumes of 411,991 barrels per day in February 2020, according to the CER. That figure then subsequently dropped to an eight-year low of 38,867 barrels per day in July 2020, when production corrections caught up with the demand destruction inflicted by COVID-19 measures.
We expect crude-by-rail exports for 2021 to continue rebounding as crude production increases and export pipeline capacity remains limited. Continued COVID-19 vaccine distribution and signs of a recovering economy have stabilized oil prices, and production has increased. However, recent decisions to rescind TC Energy’s Keystone XL pipeline permit and orders to shut down Enbridge’s Line 5 pipeline through Michigan’s Straits of Mackinac waterways limit the capacity for crude transport by pipeline.
With more than 97 per cent of Canadian crude oil exports going to the United States and U.S. heavy crude refiners on the Gulf Coast currently unable to rely on production from Venezuela and Mexico, we expect crude-by-rail export volumes from Canada to the United States to increase through 2021. Whether this is the most efficient crude transport method, however, remains a subject of debate.
Call us at 1 855 363 3526 or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by Homan Chung and originally appeared on 2021-04-16 RSM Canada, and is available online at https://rsmcanada.com/our-insights/the-real-economy/the-real-economy-canada-volume-9/transporting-oil-by-railcar-to-increase-through-2021.html.
RSM Canada Alliance provides its members with access to resources of RSM Canada Operations ULC, RSM Canada LLP and certain of their affiliates (“RSM Canada”). RSM Canada Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM Canada. RSM Canada LLP is the Canadian member firm of RSM International, a global network of independent audit, tax and consulting firms. Members of RSM Canada Alliance have access to RSM International resources through RSM Canada but are not member firms of RSM International. Visit rsmcanada.com/aboutus for more information regarding RSM Canada and RSM International. The RSM trademark is used under license by RSM Canada. RSM Canada Alliance products and services are proprietary to RSM Canada.
FCR a proud member of RSM Canada Alliance, a premier affiliation of independent accounting and consulting firms across North America. RSM Canada Alliance provides our firm with access to resources of RSM, the leading provider of audit, tax and consulting services focused on the middle market. RSM Canada LLP is a licensed CPA firm and the Canadian member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM Canada Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how FCR can assist you, please call us at 1 855 363 3526