MERCADOS Y OPERACIONES DE TUBERÍAS DE ACEITE

OIL PIPELINE MARKETS AND OPERATIONS

INTRODUCTION

Imagine the ideal freight transportation system

of the future: merchandise would flow to market

through an extensive system of underground

conduits, leaving the nation’s highways safer

and less busy as a result. From a few highly

automated control rooms scattered around the

nation, operators would receive merchandise

from manufacturers and guide it safely along

the most economical corridors available using

the latest technologies. The physical activities

of loading, transporting, and unloading would

be fully automated and performed remotely from

the control rooms. With advanced monitoring

and scheduling technology, in-transit damage

to the merchandise would be minimal and truck

traffi c accidents would be virtually nonexistent.

The few people operating the control rooms

would be primarily mechanical or civil engineers

and information technology specialists. With

no visible presence to the general public, few

employees, and virtually no accidents, such a

transportation system would have such a low

profi le that the general public would be unaware

of its existence. Such a system would “run silent,

run deep,” as stated in the title of the well-known

1958 Clark Gable movie.

Such a futuristic system exists today. The

conduits are the U.S. crude oil and refined

products pipelines. The merchandise is many

hundred types of crude oil and refi ned products.

The shippers include thousands of oil companies,

brokers, traders, independent wholesalers (called

jobbers), airlines, railroads, and merchandisers

such as Wal-Mart, Costco, and Kroger. But

because of its very low public profi le, many

transportation professionals are only dimly

aware of its existence.

Beyond the petroleum industry, pipelines

move natural gas, anhydrous ammonia, carbon

dioxide, and bulk chemicals. Also coal, iron ore,

and copper are moved by slurry pipeline (i.e., as

small particles in an aqueous solution). There

is a growing literature and interest surrounding

slurry, pneumatic, and capsule pipelines

(Marrero, 2004; Zandi, 1982; and Round, 2003).

However, this paper confi nes itself to pipeline

movements of crude oil and refi ned products.

The goal of this article is to position the

oil pipeline industry more thoroughly with the

other transport modes. It begins with an overview

of pipelines. Then, the nature of their fi t with

the oil markets is discussed. Next, the current

competitive structure of the industry is described.

Finally pipeline operations are compared with the

operations of the other transport modes. It will be

seen that they operate in continuous flow, with

linehauls, collection/dispersion mechanisms,

and interchange activities identical to the other

modes. And yet, important differences remain.

Despite considerable literature regarding other modes of transportation, little is written about oil

pipelines. This is remarkable given that oil pipelines move 17% of all intercity ton miles, but also

understandable because they have a low public profi le and, with near total automation, have few

employees. This article attempts to bridge the gap by comparing pipeline operations and those of the

other modes, showing striking similarities along with a few signifi cant differences. It also portrays

pipeline markets and their changing trends. In recent years, oil pipelines have served an industry that

is experiencing rapidly shifting geographical markets, proliferation of new products, and outsourcing

of transportation by shippers. The pipeline industry has responded to these challenges with increased

competitive entry, numerous capital construction projects, and a high reliance on technology. These

issues, along with the regulatory constraints and responses are portrayed.

by Bradley Hull

112

Oil Pipeline Markets

OVERVIEW

Figures 1 and 2 show the extensive U.S. crude

oil and refi ned products pipelines networks,

respectively. Crude oil and refi ned products

move in separate lines to avoid contamination

issues, the lines remain full of liquid, and each

line pumps only in one direction. The lines are

owned by a large number of companies, almost

all of which are common carriers. In fact, as of

the year 2000 there were 183 common carrier

pipelines (True and Stell 2004, p. 68-71). It is

clear from the fi gures that shippers often have

multiple routing alternatives, and a single move

may require multiple carriers.

U.S. pipelines are buried and invisible to

the public (with the exception of the Alaskan

pipeline, which is above ground so as not to

melt the permafrost). Statistics comparing them

with other transportation modes are shown in

Table 1. Note that the mileage of the pipeline

infrastructure exceeds that of the National

Highway System, the Class I Railroads, and

the costal shipping routes. Pipelines moved

16.5% of the intercity ton-miles in 2001 but

account for only 1.6% of the nation’s freight

bill. Employment is only 1% of that of the

trucking industry. These are all characteristics

of the futuristic mode described above.

Figure 1: Crude Oil Pipelines of North America

Source: PennWell

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