What a Fool believes
Despite the higher costs associated with moving crude via rail, it certainly makes economic sense while spot differentials remain so high and pipeline networks have yet to catch up with production volumes. For the time being, East and West coast refiners such as Phillips 66, Tesoro, and Valero will all use rail as much as possible. While this will be a small gain for these refiners, Burlington Northern could be an even bigger winner. An uptick in rail deliveries could be a strong revenue boost for the company.
This advantage might be rather short-lived, though. Enbridge Inc (USA) (NYSE:ENB) has plans to bring a 125,000 barrel-per-day pipeline online that will connect the Bakken with its existing network in the U.S. and Canada. Enbridge anticipates the pipeline to come online sometime in early 2013. Current production in the Bakken is about 500,000 barrels per day and is growing, so there is still a lot of takeaway capacity needed for the region. But it shouldn’t be surprising if we see other midstream pipeline projects coming up.
The article Meet Oil Refiners’ New Best Friend: Warren Buffett originally appeared on Fool.com and is written by Tyler Crowe.
Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him on Fool.com under TMFDirtyBird, Google +, or Twitter: @TylerCroweFool. The Motley Fool recommends and owns shares of Berkshire Hathaway.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.