- The use of rail instead of pipelines to transport crude oil has ebbed and flowed over time. While some believe this is because rail is a temporary option to be used as pipelines are being permitted and built, the study explores an alternative view: Crude-by-rail’s inherent flexibility generates value and, in spite of rail’s high price tag, reduces the incentive to invest in pipelines.
- The authors build a model that evaluates how much larger the recently-constructed Dakota Access Pipeline would have been had crude-by-rail been more costly and less flexible.
- The study finds that if rail were to be more expensive, more shippers would commit to pipeline contracts and pipelines would increase capacity.
- Further, if rail were to be less flexible such that it was not able to reach multiple destinations, more shippers would commit to pipeline contracts and pipelines would increase capacity.
- Policies that increase the cost of rail transport—such as regulations that target environmental and safety concerns—could lead to a long-run shift away from railroad.
Areas of Focus: Energy Markets
, Fossil Fuels
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...