The shale gas and oil revolution is paving the way for the great American railroad revival

The great steam engines will not return, but the American  railroad  revival is in full bloom.

The American shale gas and oil revolution is spreading its beneficial influence on a great number of industrial activities. The great American railroad revival is a case in point: 

According to data from Union Pacific (UP), the shale industry accounted for 133,000 extra UP carloads in 2012 – that’s an 84% increase from 2011. Indeed, even in the face of a coal shipment fallout, the rail industry is doing better than ever.

And the US Today reports that the railroad oil sector grew from 10,000 shipments a year to an estimated 200,000 a year in 2012.

The future for the once beleaguered U.S. and Canadian railroads is looking good:

Plus, another added benefit from America’s booming energy industry is that new manufacturing and chemical plants will also need to get their goods from landlocked states to the coast – I’m looking at you Ohio.

From a market standpoint all of the big names in rail are up double digits year over year. – Union Pacific (UNP) up 29%, Norfolk Southern (NSC) up 15% and CSX (CSX) up 10%. Each also pays near a 2% dividend.

Feeding off the same trends, the smaller U.S. rail players have done even better.

Kansas City Southern (KSU) is up 48% year over year. And one company that falls short of the top-5 by revenue, Genessee & Wyoming Inc (GWR), jumped 64% year over year.

Importantly for today’s discussion, the gains for these rail companies are just the beginning…

According to a recent report from the U.S. Department of Transportation, by 2040 demand for rail hauling is expected to increase 50% — to $27.5 billion. Indeed, rising demand for a low-cost industry like rail can lead to some solid long-term gains.

And the rail industry will benefit from the shale boom also in another way: 

Speaking of low-cost, the costs for rail providers may be getting even lower with the advent of natural gas-powered locomotives. Recently Buffett’s BNSF along with other major railways (including CSX and our neighbor to the north, Canadian National Railway) have begun testing natural gas powered locomotives.

These engines can run on liquefied natural gas (LNG), which provides an amazing cost break. In particular, while a gallon of diesel will run you about $4 the equivalent of natural gas costs about 50 cents.

So while it’s costing more and more to ship via truck or plane, the rail industry could be set for even more cost breaks. That’s a solid long-term trend if I ever saw one.

Read the entire article here

A map of the US railroad network in 1922. 

The EUSSR in action: EU commission orders eight million charging points for electric cars to be installed

EUSSR in action

"Their way of thinking is based on an almost communist type of reasoning: Economic laws do not exist, politics may dictate economics"
Václav Klaus

The EUSSR was again in full action today. EU Politburo member Siim Kallas announced that eight million charging points for electric cars, out of which 800 000 have to be public, must be established in the European Union members countries until 2020. 

At the press conference in Brussels today, Kallas (Commissar in charge of transportation) also announced that the Politburo has agreed a new European standard for the charging points, the Common Compulsory EU Plug.

Commissioner Kallas has estimated the cost of building green infrastructure of transport at €10bn until 2020, compared with the the EU's €1bn a day cost of importing oil.

Read the entire article here

A highly misleading comparison. The oil is used to power millions of vehicles, without which Europeans and European industry and commerce would be unable to function, whereas the reality for electric cars is this:

"To me, this electric hype is inexplicable," Fritz Indra, a doyen in vehicle development, recently told the trade magazine Automobil Industrie. The honorary professor at Vienna University of Technology and former head engine developer at Opel and General Motors still sees a good deal of "open questions" -- and no satisfying answers. 
The first electric cars that aren't DIY projects and offer acceptable crash protection have arrived in the dealerships. Most of them are no-frills mini-vehicles that cost as much as a mid-sized sedans and can only take you a short distance and back on a single battery charge if you're lucky enough to avoid heavy traffic. Of course, that's not the case in the winter, when energy-sapping interior heating significantly diminishes its range. And if it runs out of juice on the road, no jerry can will help. Your only option is to call a tow truck. 
With all the drawbacks of this type of car, you have to be a true believer in electric mobility to imagine that there really are one million people out there who want to have one.

Another realistic view:
"The current capabilities of electric vehicles do not meet society's needs, whether it may be the distance the cars can run, or the costs, or how it takes a long time to charge,"  
Takeshi Uchiyamada 
Vice chairman, Toyota

The building of the "green infrastructure of transport" in Europe will be nothing but a huge waste of taxpayers' money. One can only hope that this madness will be stopped in time. 

Natural gas and liquefied natural gas - the fuels of the future - are mentioned in Kallas's  fuel "mix", but by concentrating on underdeveloped and ineffective electric cars, the Politburo is - as almost always - betting on the wrong horse. And environmentally, electric cars do not make much sense, either.