In the city, the rail is a form of public transportation. Metro, Subway, Light Rail, Amtrak; all are passenger trains.
In the country, especially in landlocked regions, the rail is a necessity of the economy. Commodities are loaded onto train cars, then sent out and delivered to big customers or unloaded and placed on barges, or ships, or trucks until they reach the buyer of those commodities.
Not only is the rail used to send commodities out, but it is also used to carry in important resources.
For example, at a farm co-op meeting I attended recently, one of the speakers declared that in order to operate, “we need the railroad, and we need coal.” Unfortunately, for this co-op, the railroad in my region has been plugged up by the Bakken oil rush in North Dakota.
Trains of coal for local processing plants, as well as trains with commodities sent to business customers are being delayed 50% longer than usual, which may significantly risk commodity quality and client relations, not to mention the clients’ own production deadlines.
The Bakken oil rush is affecting farmers by resulting in higher transportation costs. Fewer rail cars are available for farm commodities, and more oil cars are filling rail transportation schedules, meaning demand for farm commodity train cars is high, but supply is low. Farmers have little choice but to pay the higher transportation costs. However, some are waiting to see if the cost of transportation goes down to avoid losing money on last year’s crop, or before signing contracts for this coming year’s crop for the same reason.
I’m no economist, but I imagine that if transportation costs stay high throughout the Bakken oil rush, processing factories receiving commodities from this region will be charged a higher rate for those commodities, and then those factories will charge the end consumer a higher rate for their product. This means you, reader.
An even worse scenario (at least for farmers), would be if the processing factories choose to purchase commodities from outside the United States, from Mexico, to avoid high transportation costs resulting from the Bakken oil rush.
I am sure there are advocates on both sides of the oil rush. On the positive side, it has created more jobs to mine the oil, build more rail cars, maintain the railroad, and operate and oversee rail transportation. Based on numbers provided at the recent farm co-op meeting I attended, the number of rail cars for oil increased 41 times in 2013 over 2012.
It’s a good time to be in the oil and rail industries!
On the negative side of the Bakken oil rush, oil from an environmental standpoint is flatout controversial, and discovering more oil to tap slows down the urgency for alternative fuel research and implementation. Then, of course, there is the effect of slowed commodity transportation on area farmers.
There have always been bad years in farming. My dad has a saying that emphasizes this point: “There are three good years in farming: 1913, 1973, and next year.” He’s been saying this as long as I can remember. The joke is, we don’t know if next year will be a good year, but we can sure hope it is.
I think we can handle a few short years of high transportation costs in the farming industry. But if it looks like the oil boom will stick around for awhile, it may prove a good idea to buy stock in the railroad industry.