Pipelines

Played an important role in the transportation industry in the post-World
War II era.
Early in the twentieth century, the oil companies operated the pipelines as integrated subsidiaries and often used them to control the oil industry by not providing needed transportation service to new producers.

Pipelines are limited in the markets they serve and very limited in the commodities they can haul.
The only mode with no backhaul,;i.e., they are unidirectional with products that only move in one direction through the line.

More than 57.5 percent of the total intercity ton-miles shipped in the US in 1995.
They are virtually unknown to the general public but represent a key component in our transportation system.
P.195. Pipeline diameters have increased in recent years, and the larger diameters have increased capacity significantly because of the increased volume that can move through the pipeline.

Although some private carriers exist today, the for-hire carriers dominate the industry as so called common carriers.
Oil companies have been the principal owners of pipelines.

Like the railroad industry, the pipeline has a small number of very large carriers that dominate the industry.
20 major integrated oil companies control control about two-thirds of the crude oil pipeline mileage.

Reasons for the limited number of pipeline companies.
Start-up costs are high.
Like railroads and public utilities, the economies of scale are such that duplication or parallel competing lines would be uneconomic
A 12-inch pipeline operating at capacity can transport three times as much oil as an eight-inch pipeline.

P.197. Intercity ton-miles increased to 628 billion in 1997. The reported operating revenue decreased from 1985 to 1992 by almost 4 percent. However, oil pipelines play a major role in our transportation network, because they transport more than
20 percent of the total intercity ton-miles.

The movement data for natural gas are presented in cubic feet, rather than tonmiles.
P.197. Shows that operating revenues also decreased in 1985 with the decline of the volume moved.

Very specialized carrier in that they transport a very limited variety of products.
Four main commodities hauled are
Oil and oil products
Natural gas
Coal chemicals

1994, crude oil and oil products accounted for approximately 57 percent of total pipeline use.(Table 7.6)
The split by modes between pipeline and water carrier has changed for several reasons.
Alaskan => Panama => Atlantic Coast
West Coast To Midwest
Length of haul is medium compared to other modes. Crude oil movements average about 800 miles per shipment, and product lines average about 400 miles per movement. Buy size is large.

Account for the second largest number of miles of intercity pipelines – 266,900 miles.
(Table 7.7, Page 199)
The natural gas companies produce about
10 percent of the gas they transport.
Independent companies produce the remaining 90 percent.

Coal pipelines are frequently called slurry lines because the coal is moved in a pulverized form in water (one-to-one ratio by weight)
Remove the water once it arrived and the coal is ready to use.
Primarily used for transporting coal to utility companies for generating electricity.
Use enormous quantities of water
Some states are a scarcity of water
The water is not reusable ( no backhaul)

A limited number of different types of chemicals are carried by pipelines.
Three major chemicals are
Anhydrous( 無水的 ) ammonia – for fertilizer
Propylene( 丙烯 ) – used for manufacturing detergents
Ethylene ( 乙烯 ) – used for making antifreeze
( 防凍劑 )

Low rates
Average revenues for pipeline companies are below one-half of a cent per ton-mile
Have a very good loss and damage record
Types of products transported
Underground and completely encased movement
Provide a warehousing function because their service is slow(an average of three to five miles per hour )

Although its slow speed can be considered an advantage due to its use as a free form of warehousing, in some instances the pipeline’s slow speed can be considered a disadvantage. Like sometimes need to hold higher levels of inventory to compensate for possible shortages because the pipeline will not be able to deliver an extra amount of the product in a short period of time.

Offer a relatively fixed route of service that cannot be easily extended to complete doorto-door service -- limited accessibility.
May not be a critical problem because the source of the pipelines and the location of the refineries are known and are fixed for a long period of time.
Frequently, pipelines depend on railroads and motor carriers to complete delivery, which adds to user costs.

Limited to a rather select number of products: crude oil, oil products, natural gas, coal, and a limited number of chemicals.
There is interest in using pipelines for other products but the technology has not yet been fully developed.
Capsule( 膠囊 )&pneumatic( 有氣腔的 )pipelines
Frequency of Service
Large tenders (shipment size requirements) and slow speed of pipelines reduces the frequency
On the other hand, service is offered 24 hours a day, seven days a week.

Intramodal competition is limited by a number of factors
Small number of companies – limited price competition
The economies of scale and high fixed costs have led to joint ownership of large-diameter pipelines because the construction of smaller parallel lines is not very efficient.
High capital costs preclude duplication of facilities to a large extent

Compete with railroads, water carriers, and motor carriers, however, the level of competition is limited.
The most serious competition is water, or tanker, operations.
Truck service complements rather then competes with the pipeline, because trucks perform a distribution function for pipelines
(i.e., delivery).

Once a pipeline has been constructed between two points, it is difficult for other modes to compete.
Costs are extremely low
Dependability is quite high
Limited risk of damage to the product being transported
Only exception is probably coal slurry pipelines because of the need to move the pulverized coal in water can make the costs comparable to rail movements
Water carriers come closest to matching pipeline costs and rates.

Total pipeline investment is in excess of $21 billion, it would cost about $70 billion to replace the system at today’s costs.
共通管道

Gathering lines bring oil from fields to a gathering station, where the oil is stored in sufficient quantity to ship by trunk line to a refinery.
After refined, the various products are stored at a tank farm before they are shipped via product line to another tank farm. A motor carrier most frequently makes the last segment of the trip, to the distributor or ultimate customer.

Trunk lines are usually more than 30 inches in diameter and are the major component of the pipeline system.
Stations that provide the power to push the commodities.
For oil movements, pumps are located at the stations, which vary in distance from 20 to
100 miles, depending on the viscosity of the oil and the terrain.

Pumping stations for large-diameter pipelines can provide 3,000-6,000 horsepower.
Compressors are used for natural gas and pumps are used for the liquid items.
Pipes are constructed of special high-quality alloy steel with a life expectancy of 50 years or more.

Safety
Requiring pipeline operators to identify facilities located in unusually sensitive areas and high density population areas
Maintain maps and records detailing that information
Provide those maps to federal and state officials upon request
Pipeline is coated with protective paints and resins, and special techniques are used to control corrosion after the pipeline is in the ground.

Computers at the pumping stations continually monitor the flow and pressure of the oil system.
Any change indicating a leak is easily detected.
Routine visual checks and searches by airplane are sometimes used to located leaks.
15 grades of crude oil and a range of products including jet fuel, kerosene, and aviation fuel.
Usually, products are scheduled one month in advance with kerosene moving first, then highgrade gasoline, then medium-grade gasoline, then various other products, then with home heating oil last.

High proportion of fixed costs with low capital turnover.
Own right-of-way by purchasing or leasing land and constructing the pipeline and pumping stations along the right-of-way.
Property taxes, amortization of depreciation, the return to investors, and preventative maintenance all contribute to the high ratio of fixed to variable expenses.

The terminal facilities of pipelines contribute to the high level of fixed costs.
No vehicle helps to explain the low variable costs, because vehicles are frequently a major source of variable expense.
Labor costs are very low in the pipeline industry because of the high level of automation.

Pricing is unique
The nature of operation (one-way movement, limited geographic coverage of points, limited products, etc.) provides little opportunity to provide differential pricing practices.
Minimum shipment sizes, usually called tenders, are required; these range from 500 barrels to 10,000 barrels(one barrel equals
42 gallons).

Pipeline rates are very low, which is reflected in the fact that they carry more than 20 percent of the total intercity ton-miles and receive only about two percent of the total revenues. One gallon of crude oil can be sent from Texas to New York for only
1.8 cents.
Water carrier costs come closest to pipeline costs, in fact, international supertankers have lower costs than most pipelines. When considering pipelines with diameters of 30 inches or more, even ocean carriers have difficulty matching pipeline costs.

Can have a powerful impact on the environment and the people who live in it.
A leak of oil products and chemicals could have disastrous effects.
Increases in housing needs could create a situation in which people would live close to the pipelines and be exposed to the effects of a potentially harmful product leak
(such as oil or gasoline).

Even when people would not be directly affected by a leak, a leak could have a serious impact on wildlife living around the pipeline.
However, the overall record of the industry in this area is outstanding. There is a much higher risk of product leakage/damage with oil tankers as evidenced by the number of spills in recent years.