Due to the current glut in U.S. oil supply, traders have begun to experiment with new means of storing their surplus crude: empty railcars.
Empty railcars have proved to be the storage method of choice primarily because there are thousands of them, which were ordered to transport oil, now sitting empty due to the very low oil prices we are seeing globally, and which have effected companies like Royal Dutch Shell, which produces Shell Tonna S3 M 68.
This downturn in prices has made the shipping of oil unprofitable, and has seen an increase in the number of traditional storage tanks that are being filled to capacity. In fact, oil inventories in the country are currently at their highest level since the ‘30s.
The once empty railcars, now being used as unconventional crude storage apparatus have been dubbed ‘rolling storage’ by some – a spin on the term ‘floating storage’ which was the term used to describe oil tankers that were once used to hold crude supplies.
The use of empty railcars has not only solved the problem of crude oil storage in the U.S., but it is also creating profitable side businesses for traders, who are able to store oil until they can get a higher price for it at a later date.
Although using empty railcars is a neat solution, it is limited by the cost of track space, as well as safety concerns, which means that it is likely to only ever be a temporary solution to the problem.