Shale gas hits US railroads and diesel demand

Updated 02 April 2016
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Shale gas hits US railroads and diesel demand

LONDON: Cheap natural gas has slashed coal traffic across the US rail network and in turn hit demand for diesel, demonstrating the interlocking relationship between the country's energy and transport systems.
US rail freight declined more than 6 percent in the first 12 weeks of 2016 compared with a year earlier, according to the Association of American Railroads (AAR).
Most categories of bulk freight were down compared with 2015 but by far the largest drop occurred in coal, the single-largest commodity hauled on the network.
The number of railcars loaded with coal in the first 12 weeks was down by 32 percent compared with 2015 ("AAR reports weekly rail traffic for the week ending March 26").
Coal loadings are down because power plants have switched to burning inexpensive natural gas, which has left them with record stockpiles of unburned coal and cutting deliveries.
That in turn is reducing the number of railcars moving across the tracks and the railroad companies' purchases of diesel, leaving diesel stocks at a seasonal record.
So in a roundabout way, the shale (gas) revolution has battered the US coal industry and in turn hurt the railroads, and in the process is worsening the imbalances in the diesel market.

GAS DISPLACES COAL
US power plants burned 740 million short tons of coal in 2015, down 13 percent from 2014, and the smallest quantity since 1987, according to the Energy Information Administration.
Coal stocks at power plants surged to 197 million tons at the end of 2015, up 30 percent from the end of 2014.
Some analysts attribute the slump in coal-fired power generation to clean energy policies or a mild winter caused by the El Nino weather phenomenon, but the main reason is fierce competition from cheap gas.
Total generation at utility-scale facilities was unchanged last year from 2014, according to the EIA, which suggests weather-related demand was not the main cause of the coal slump.
Coal-fired generation fell by 226 terawatt-hours (TWh) in 2015. Renewable generation rose by 11 TWh. But gas-fired generation increased by around 208 TWh.
The volume of natural gas burned in U.S. power plants surged by almost 18 percent to a record 10 trillion cubic feet.
The average cost of natural gas delivered to electricity generators declined by 40 percent over 2015 compared with a 14 percent fall in the cost of coal.
Coal remained cheaper as a fuel than gas but the change in relative prices encouraged a shift in the generation mix towards gas.
In the short term, abundant gas thanks to the shale revolution, rather than climate policies, has reduced coal combustion and curbed carbon emissions.

COAL HITS RAILROADS
Coal is the single largest commodity moved by transportation networks in the United States, with the possible exception of crude petroleum, for which measurement problems prevent an accurate comparison.
By weight and distance, coal accounted for 22 percent of all freight moved in the United States in 2012.
Roughly two-thirds of the coal moves from mine to power plant in whole or part by rail.
In turn, coal is the biggest commodity hauled across the railroad network and vital to the commercial success of the railroad companies.
Coal accounted for 38 percent of all tonnage carried on the rails and 19 percent of all railroad revenues in 2014.
So the slump in coal combustion has had an immediate and significant impact on volumes across the rail network and the revenues of the major railroads.
Burlington Northern Santa Fe railroad, the largest coal carrier, has furloughed about 10 percent of its workforce owing to lower demand for coal and oil shipments.

RAIL SLUMP HITS DIESEL
The railroads are in turn one of the biggest consumers of diesel fuel in the United States, so the rail slump has contributed to the drop in distillate demand.
Railroads accounted for 6 percent of all diesel sold in the United States in 2014.
The Burlington Northern-Santa Fe railroad, now owned by Warren Buffett's Berkshire Hathaway, is the second-largest buyer of diesel in the United States after the US Navy.
Once the other major railroads are included, the rail sector is the largest consumer of diesel fuel after road transport (63 percent) and home heating (6 percent).
Railroads consume around 240,000 barrels per day of distillate fuel, which is not large enough to have a major impact on diesel demand on its own but in combination with other factors has had a material effect.
The slump in oil drilling coupled with efforts by manufacturers, distributors and retailers to combat overstocking has led to a broad-based drop in freight movements including on the roads.
Oil drillers were also major consumers of diesel fuel to run their diesel-electric motors for drilling and ancillary oilfield power.
US distillate consumption dropped by 60,000 barrels per day in 2015 (1.5 percent) after rising by more than 200,000 bpd (5.5 percent) in 2014 and 85,000 bpd in 2013 (2.3 percent).
Distillate consumption declined last year even as the economy grew and gasoline use increased by 240,000 bpd (2.7 percent), according to the EIA.

— John Kemp is a Reuters market analyst. The views expressed are his own.


Saudi Arabia has lion’s share of regional philanthropy

Updated 26 April 2018
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Saudi Arabia has lion’s share of regional philanthropy

  • Kingdom is home to three quarters of region's foundations
  • Combined asets of global foundations is $1.5 trillion

Nearly three quarters of philanthropic foundations in the Middle East are concentrated in Saudi Arabia, according to a new report.

The study, conducted by researchers at Harvard Kennedy School’s Hauser Institute with funding from Swiss bank UBS, also found that resources were highly concentrated in certain areas with education the most popular area for investment globally.

That trend was best illustrated in the Kingdom, where education ranked first among the target areas of local foundations.

While the combined assets of the world’s foundations are estimated at close to $1.5 trillion, half have no paid staff and small budgets of under $1 million. In fact, 90 percent of identified foundations have assets of less than $10 million, according to the Global Philanthropy Report. 

Developed over three years with inputs from twenty research teams across nineteen countries and Hong Kong, the report highlights the magnitude of global philanthropic investment.

A rapidly growing number of philanthropists are establishing foundations and institutions to focus, practice, and amplify these investments, said the report.

In recent years, philanthropy has witnessed a major shift. Wealthy individuals, families, and corporations are looking to give more, to give more strategically, and to increase the impact of their social investments.

Organizations such as the Bill and Melinda Gates Foundation have become increasingly high profile — but at the same time, some governments, including India and China, have sought to limit the spread of cross-border philanthropy in certain sectors.

As the world is falling well short of raising the $ 5-7 trillion of annual investment needed to achieve the UN’s Sustainable Development Goals, UBS sees the report findings as a call for philanthropists to work together to scale their impact.

Understanding this need for collaboration, UBS has established a global community where philanthropists can work together to drive sustainable impact.

Established in 2015 and with over 400 members, the Global Philanthropists Community hosted by UBS is the world’s largest private network exclusively for philanthropists and social investors, facilitating collaboration and sharing of best practices.

Josef Stadler, head of ultra high net worth wealth, UBS Global Management, said: “This report takes a much-needed step toward understanding global philanthropy so that, collectively, we might shape a more strategic and collaborative future, with philanthropists leading the way toward solving the great challenges of our time.”

This week Saudi Arabia said it would provide an additional $100 million of humanitarian aid in Syria, through the King Salman Humanitarian Aid and Relief Center.

The UAE also this week said it had contributed $192 million to a housing project in Afghanistan through the Abu Dhabi Fund for Development.