Looming US rail strike threatens crude and refining - report

Quantum Commodity Intelligence - A looming US rail strike is set to have a major impact on US manufacturing and the oil sector, according to the US Business and Industry Connection website, noting a rail worker strike could begin as soon as this Friday, 16 September.

The refining and petrochemical industries will be heavily exposed in the event of a rail labour strike, said the BIC report, adding railroads are already embargoing shipments of critical materials ahead of a potential strike.

While refiners and petrochemical manufacturers have contingency plans, a shutdown in rail service would result in widespread production curtailments and some potential facility shutdowns as early as this weekend, possibly leaving some sensitive regional markets with insufficient fuel.

More than 100,000 rail workers will be free to strike for the first time since 1992 if contracts are not agreed upon when a federally mandated cooling-off period expires this Thursday unless Congress intervenes.

Among the threats to oil and the wider energy industry, the BIC report listed the following potential disruptions:

• More than two million rail carloads of fuel and petrochemical feedstocks and products move by rail each year.
• Approximately 300,000 barrels of crude oil move by rail each day, with supply equivalent to two mid-size refineries. Other critical feedstocks, chemicals and additives—such as Isobutane for gasoline production and water treatment chemicals like chlorine—are delivered daily by rail.
• Some regions, because of limited pipeline capacity and inadequate trucking alternatives, have no option apart from rail to receive these essential deliveries.
• Five million barrels of propane—roughly a third of US consumption—move by rail each month.
• If rail cars aren't coming in regularly to pick up facility products, including the sulfur that refiners remove from crude oil, production will have to slow.
• Nearly all finished gasoline in the United States is 10% ethanol (E10) and much of the ethanol required for fuel is transported from the midcontinent via rail.