The rapid rise in rail shipments of oil means the odds are good Canada’s railroads will suffer more disasters like Lac-Megantic, says economist Jeff Rubin, throwing the future of Canada’s railroads and oil industry into doubt.
Rubin, the former chief economist for CIBC and author of “The End of Growth," noted in an interview with Maclean’s that the train that blew up in Lac-Megantic last July, killing 47 people, had passed through Toronto on its way.
If a future disaster were to take place in a major city, the lawsuits would “dramatically hike the insurance costs” for railroads.
“When I say we’re going to have other disasters, I’m not making a statement about corporate negligence or malfeasance,” Rubin said. “I’m merely talking about the laws of probability. Rail is a far more expensive and hazardous way of moving oil than pipelines.”
Shipments of oil by rail in Canada grew 28,000 per cent from 2009 to 2013, according to estimates from the Canadian Railway Association. The U.S. saw a 44-per-cent in rail oil shipments in the past year.
Rubin’s comments come days after two trains carrying Bakken shale oil collided in North Dakota, highlighting the risks of that state’s recent and massive boom in unconventional oil extraction, and prompting the U.S. to issue a warning that Bakken oil may be more explosive than conventional oil.
Rubin made similar comments in an interview with The Huffington Post Canada last fall, calling the boom in oil-by-rail an “unintended consequence” of the climate movement’s campaign to halt pipeline construction.
“I’m sure that environmentalists don’t agree much with Stephen Harper on energy policy, but it’s hard to argue with him when he says that rail is an economically costly way of moving oil, and a much more environmentally hazardous way, and we’ve seen that” in the Lac-Megantic disaster last summer, Rubin said.
Contrary to the oilsands industry’s predictions, “we’re unlikely to see regulatory approval of the infrastructure to allow expansion to 5 million barrels per day” from the current 2 million, Rubin said.
In the Macleans interview, Rubin said the cost of increasing oilsands production works out to $70 to $100 per barrel, while oilsands exports are selling for about $58 per barrel at present.
The federal government and the industry have “grossly miscalculated the economics of the oilsands,” he said.
Read the Macleans interview here. Read the complete interview with The Huffington Post Canada here.
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