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Transporting oil by railcar to increase through 2021

April 16, 2021

Authored by RSM Canada LLP

Kirby W. Houle, CPA, CA shared this 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.

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This article was written by Homan Chung and originally appeared on 2021-04-16 RSM Canada, and is available online at

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