Which companies are involved in the movement and storage of oil? This is a question I asked myself when I read the following.

  • Oil supply will continue to rise as U.S. productions stays strong and OPEC continues to flood the global market. With global production exceeding demand the question soon will become where do we put this oil?

A quick look shows more than a dozen make tanks for petroleum storage and another quick look points to a problem in moving all the oil the US is producing.

  • When energy companies started extracting oil from shale formations in South Texas a few years ago, they invested hundreds of millions of dollars to make the volatile crude safer to handle.

Not only is volatile crude difficult to work with, it is difficult to ship, which the current US infrastructure for moving oil rather obsolete.

  • In North Dakota’s Bakken Shale oil field, nobody installed the necessary equipment. The result is that the second-fastest growing source of crude in the U.S. is producing oil that pipelines often would reject as too dangerous to transport.

There are not enough pipelines, not enough safe pipelines, and not enough pipelines pointing in the right direction, since for so long we have been bringing oil into the country, rather than sending it out. What does this all mean?

The way I see it, looking to the big companies that support the oil industry infrastructure is one way to invest in the oil glut around the world. Sure, more tanks are needed, as the US producers show no sign of easing off productions in the face of the glut and, as well, they begin storing oil in order to take advantage of the a price rise in the future, at least that is the thinking.

No, me thinks the place to look is the railroad and trucking sector. Me thinks that moving the oil from point A to point B will raise the revenue stream for the railroad sector most assuredly first and then the large trucking concerns second.

Make no mistake, we have lots of oil flowing now and that all needs to get to refineries and when it is done there, the gasoline or diesel needs to move to wherever the gasoline or diesel is needed, which is just about everywhere. On top of that, millions of gallons of oil will be put in temporary storage until such a time as 1) the backed up and far too few refineries can handle it and b) the price of oil rises to the point US oil producers can make a decent profit selling the oil.  

In any case, the US oil boom is far from over, so even if the producers are making less, the companies that support the producers will be making more. Go find them and trade them.

Trade in the day; invest in your life …

Trader Ed