Warren Buffet and his Curious Bet on Rail

When Buffet chose to park so much money into the rail industry, I had only one key question.  What does he know that we do not know?  It just so happens that the rail industry represents a huge legacy of sunk costs and infrastructure that barely changes from year to year.  Rapid growth is rare and generally impossible outside a World War.

Then magically, the Bakkan paid off just as huge amounts of long scheduled Canadian oil started south to reach natural markets in the Gulf.  Thus all new production is largely forced to go by rail even without a quick build out of fresh pipeline capacity.  Delaying that pipeline capacity can only pay off huge on this rail position.

Setting up this equation and quietly ensuring the fix was in becomes business as usual.  Unfortunately, the optics say as much and that is why this article can make that point.  It was all too friendly and cozy.  That may now become a problem.  They needed to be a lot sneakier here.

Properly supervised pipelines are the safest and cheapest way to move oil.  Even accidents can be largely contained and quickly managed although again that does not stop negligence.  A train blowing up in Chicago is quite another matter.  These will happen simply because the best is seriously dangerous.  Now imagine a mile long train traveling at speed suddenly derailing.  This already happened by accident and a town in Quebec had its center burned out and 43 citizens killed.

Rail is not a good solution which is why the industry shuns that option.

In the meantime it is definitely a lot harder to make money?

Warren Buffet owns railroad and tank car company and is a big Obama supporter. Obama blocks pipeline which boosts oil shipped by rail

DECEMBER 19, 2013

http://nextbigfuture.com/2013/12/warren-buffet-owns-railroad-and-tank.html

The Keystone pipeline expansion is still being stalled. Canadian Ambassador Doer observes that Obama's "choice is to have it come down by a pipeline that he approves, or without his approval, it comes down on trains.

Increased rail capacity is moving more oil from Canada's oilsands

More oil is moving by rail from North Dakota as well

Warren Buffett has formally endorsed and made campaign contributions to Barack Obama's presidential campaign. On July 2, 2008, Buffett attended a $28,500 per plate fundraiser for Obama's campaign in Chicago hosted by Obama's National Finance Chair, Penny Pritzker and her husband, as well as Obama advisor Valerie Jarret.

Warren Buffett’s Berkshire Hathaway (BRK/A) owns Union Tank Car, just one piece of his big bet on rail, which also includes the Burlington Northern Santa Fe railroad.

This is all probably just convenient luck for Warren Buffet. The environmental lobby and their money is mainly what is considered to be the reason Obama made the decisions he has on the Keystone pipeline. 

The Burlington northern railroad is worth about $34 billion now. In 2009, Warren Buffett bought BNSF railroad for $26 billion.

In 2008, Buffett's Berkshire Hathaway bought 60 percent of Marmon Holdings, a private firm owned by trusts associated with Chicago's Pritzker family, for $4.5 billion. 

They make train cars specifically to move oil and gas

Tank cars, those torpedo-shaped rail cars built to carry liquids, anything from milk to industrial chemicals, are increasingly being used to carry shale oil. “The traffic has grown significantly, from probably 50,000 carloads a year in 2010 to over 700,000 this year,” says Toby Kolstad, president of the consulting firm Rail Theory Forecasts. “It probably will rise above a million carloads a year in the next year or two.”

There are multi-billion dollar backorders for tank cars.

Obama's very richest friend benefits from his policies. How are the other 99.99% doing ?