LOUISVILLE, Ky., Nov. 12 (UPI) -- Leasing rates for rail cars slated to carry crude oil throughout the North American market have plummeted along with the crude oil prices, analysis finds.
Industry research group Genscape said leasing rates for rail car model CPC-1232, designated for crude oil transport, dropped from $2,000 per month in early 2014 to $475 month because of lower crude oil prices and a general weakening in the energy sector.
"It's like we can't even give the things away," an industry source was quoted by Genscape as saying.
The increase in crude oil production in North America had been more than the existing network of pipelines can handle, which left many in the industry to turn to rail as an alternate transit method in the peak era of shale.
In North Dakota, the state at the heart of the shale oil boom, rail broke away from pipelines as the main source of crude oil delivery in 2012. After peaking in December 2014, when the state set its crude oil production record at 1.22 million barrels per day, transport by rail has been in a general decline and is now at parity with pipeline transport.
For Canada, research from the U.S. Energy Information Administration found rail could fill part of the vacuum left by the refusal of TransCanada's permit for the Keystone XL cross-border pipeline, designed to carry more than 800,000 bpd.
Meanwhile, there has been a corresponding increase in the number of rail incidents involving crude oil shipments. As a result of new regulations and enforcement measures, shippers are using the newer-model CPC-1232 tankers and phasing out DOT-111 cars, many of which were involved in recent, and sometimes fatal, derailments.
Industry sources were quoted by Genscape as saying there is "little to no demand" for the older model cars.