Annual Review & Outlook 2013: Kansas City Southern

David L. StarlingThe resurgence of energy production in the U.S. during the past few years has been nothing short of remarkable. The International Energy Agency is projecting that our country will surpass Saudi Arabia as the world’s leading oil producer by 2020 and become a net oil exporter by 2030. The rail industry has played, and will continue to play, an important role in the changing dynamics of U.S. energy production. 

Our industry plays a key role in supporting new shale drilling sites by delivering critical input products such as frac sand and drilling pipe. Railroads also provide a safe and efficient method to move the crude oil that is extracted from the drilling sites to the refineries. Over the long term, even if the Keystone Pipeline is built, the pipeline’s capacity will not be able to handle all of the crude demand from the refineries. Railroads will continue to play an important role in the transportation of crude oil in 2013 and beyond. 

With these changes to our country’s energy picture comes some uncertainty surrounding coal, one of the rail industry’s largest commodities. Low natural gas prices, resulting from an abundant supply of natural gas extracted from new shale reserves, and tightened emissions requirements, have made it more economical for many utilities to burn natural gas over coal. Although the consensus is that natural gas prices have bottomed and are moving back up, there will continue to be some uncertainty surrounding domestic coal shipments for the industry during the next year. With that said, the rail industry is extremely resilient and will continue to find new opportunities to support our nation’s shifting energy profile.

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