CSX officials expect that cheap crude oil prices will help the economy grow and help the railroad deliver significantly better profits this year.
Leaders of the railroad, based out of Jacksonville, Fla., said that cheap oil will provide a boost to the economy, which will mean more freight.
“From every indication that we see, it’s a positive experience for the American taxpayer, for the American economy, so I think lower crude oil prices is very positive for our economy, very positive for CSX,” Executive Vice President Clarence Gooden said Wednesday.
The railroad doesn’t expect a slowdown in crude oil shipments from North Dakota to eastern refineries. CSX Corp. CEO Michael Ward said oil producers in the Bakken oil field can remain competitive on existing wells even if crude oil prices fell as low as $35 a barrel.
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Crude oil was selling for $46.40 a barrel by midday Wednesday on the New York Mercantile Exchange after posting modest gains. But oil prices are less than half of last June’s peak of $107.
Ward said companies have told the railroad that the cheap oil prices aren’t likely to affect production this year although they could have an impact in 2016.
“It’s hard to believe that they stay this low that long,” Ward said. “Sooner or later, somebody is going to have to blink and take some production out.”
CSX discussed its finances Wednesday, one day after reporting that its fourth-quarter profit jumped 15 percent to $491 million on $3.2 billion revenue. Those results were in line with Wall Street’s expectations.
Over the past four years, railroads have dealt with weak coal demand because a number of utilities took advantage of cheap natural gas prices to turn away from coal. CSX says that transition is complete now.
Domestic coal volume is expected to be roughly flat in 2015 while export coal volume will likely decline.
CSX Corp. operates more than 21,000 miles of track in 23 Eastern states and two Canadian provinces.
CSX plans to spend $2.5 billion on capital projects and equipment, like locomotives, this year. That’s up slightly from last year’s $2.4 billion.
CSX was the first major U.S. freight railroad to release quarterly earnings. Union Pacific Corp. will report its fourth-quarter results next Thursday, Jan. 22. Norfolk Southern Corp. will follow with its report on Jan. 26. BNSF is owned by Berkshire Hathaway Inc. so that railroad will deliver its results later as part of the conglomerate’s report.