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Page added on March 7, 2013
Railroad to make shift to natural gas locomotives
The freight railroad company BNSF made a big announcement today. It’s going to do a little experiment and switch from diesel to natural gas to power its locomotives. BNSF happens to be owned by Warren Buffett’s Berkshire Hathaway. Buffett is betting big on natural gas. If this latest natural gas play works, it could mean big profits and big changes for the entire rail industry.
BNSF considered using natural gas in its locomotives back in the ’80s, but there is a big difference between then and now. Natural gas is way cheaper than the diesel today.
“Something has to take advantage of that economic arbitrage,” says energy analyst David Bellman. He points out that BNSF is doing exactly that — taking advantage of the low-cost of natural gas.
But the transition won’t be simple. Locomotives will have to be redesigned, and they will need more fuel storage and new fueling stations. All that infrastructure is going to be expensive. But according to energy expert Amy Jaffe, it’s worth it for Buffett and Berkshire Hathaway.
Even with the cost of converting vehicles, Jaffe says, “You can make money almost overnight.”
Once the conversion is complete, BNSF trains will have to refuel less often than diesel trains, they will be cheaper to run and they will pollute less. Jaffe expects more railroads to make the switch.
That could put the entire railroad industry on a new track. Companies like GE and Caterpillar, which are designing the new liquid natural gas locomotives, would benefit from the conversion. Those benefits could spread to gas suppliers.
“You have some very big players” says Jaffe. “Shell has entered this market, BP is looking at this market, Conoco Phillips.”
Of course, all that demand for natural gas will make the price go up and reduce some of its advantage over diesel. But most analysts expect natural gas to stay below the cost of diesel for quite a while. And a rise in demand coupled with a little price increse probably wouldn’t bother Warren Buffett, who has invested billions in natural gas.
In the end, he could make out like a train bandit.
6 Comments on "Railroad to make shift to natural gas locomotives"
BillT on Thu, 7th Mar 2013 1:05 pm
Make the conversion and next year, you can change it back when NG regains its high prices. Fraking is a big bubble.
Kenz300 on Thu, 7th Mar 2013 2:56 pm
Anything that breaks the oil monopoly on transportation fuels is good.
Competition is good for the consumer.
rollin on Thu, 7th Mar 2013 4:18 pm
Railroads are usually pretty conservative about major changes, but once in a while they just go for it. I wonder if this will be one of those times. We will know in about five years.
DC on Thu, 7th Mar 2013 5:01 pm
North Americans are so stupid it is nothing short of amazing. Diesel locomotives are actually one of the more * EFFICIENT* ways to move things around that we currently have running on fossil-fools. A NG loco would be nowhere near as efficient per ton of cargo as diesel is. So wTF? These guys must get all there news from Bloomberg or Fox, and no other source if they think this is a good idea.
Here is short list of the best way to power locomotives. From top
1)Electric
2) Diesel-Electric
Its my sincere hope that they get everything converted at huge expense in time, money and effort just as the ‘cheap’ frak gas bubble pops and the price of Loco-NG becomes as expensive as the diesel they just ripped out, while delivering far less energy per unit volume as well.
cipi604 on Thu, 7th Mar 2013 6:29 pm
Nat-gas is the only way out for the next lost decade.
James on Fri, 8th Mar 2013 1:08 am
Great, the geologists don’t actually have a solid idea of how much NG is down there. Now, we are ramping up the use of NG, with no idea if we will have as much as we will need. Prices will go up fast as the use of NG escalates. We need to come up with ideas for how to use less of everything. Save the NG for heating homes.