Oil and product pipelines: Unit economics
Huge build costs, cheap barrels: the economics of a full pipe
What this tab covers What it costs to move a unit of energy this way: capital and operating costs, tariffs, utilisation and how it compares with the alternatives.Building a pipeline costs a great deal, but moving oil through a large, full one is cheap: about USD 1 to 2 per barrel per 1,000 km, or roughly USD 1 per MWh of oil energy. A half-empty line costs about twice as much per barrel.
Key costs
| Measure | Value | Note |
|---|---|---|
| Capital cost, large crude line | about 5 million USD per km3 | Analyst rule of thumb for a 1 million b/d line; varies widely with terrain and permitting (2026) |
| Toll needed for 10% return, 500 km | about 1 USD per barrel3 | Analyst model, 1 million b/d light crude; about USD 2 per barrel per 1,000 km (calculated) |
| Cost to move 1 MWh of crude 1,000 km | about 1.2 USD/MWh3 | USD 2 per barrel divided by about 1.7 MWh per barrel (calculated) |
| US average pipeline vs rail | about 5 vs 10 to 15 USD per barrel5 | EIA, 2012 industry estimates (dated); rail unit trains Bakken to Gulf Coast about 12.25 to 12.75 |
| Trans Mountain expansion cost | about 34 billion CAD8 | Added 590,000 b/d, so about C$58,000 per b/d of new capacity (calculated) |
| Trans Mountain interim benchmark toll | 11.46 CAD per barrel7 | Edmonton to Burnaby, 15-year contract under 75,000 b/d; fixed part C$10.88 (CER, November 2023) |
| Electricity transmission vs liquid pipeline | 20 to 50 times cost per MWh delivered4 | US modelling study (2021) |
Where the money goes
| Item | Share or amount |
|---|---|
| Capital recovery (return on and of investment) | the largest part of the toll; halving throughput roughly doubles unit cost3 |
| Pumping electricity | about 2.1 kWh per barrel per 500 km; at an assumed USD 0.08 per kWh about USD 0.17, or around a sixth of a USD 1 toll (calculated)3 |
| Cost overruns | can double the toll: Trans Mountain's fixed toll rose from C$5.76 (2017 estimate) to C$10.88 per barrel7 |
Most of the cost is paid before the first barrel moves, so the toll mainly repays capital over decades of throughput. Owners want long take-or-pay contracts, and regulators cap tolls to stop monopoly pricing.
Rail costs two to three times as much per barrel and trucks more again. Tankers are cheaper per barrel-km over long sea routes: a VLCC moves Gulf crude to China for about USD 2 per barrel in normal markets (see the tankers tile).
Sources
- Pipelines: the energy economics (analyst model, updated 23 July 2026) Thunder Said Energy, 2026
- Cost of long-distance energy transmission by different carriers (DeSantis et al., iScience 24, 103495) iScience / DOAJ record, 2021
- Rail delivery of US oil and petroleum products continues to increase, but pipelines remain dominant US EIA, Today in Energy, 2012
- CER sets interim tolls for the expanded Trans Mountain pipeline system Canada Energy Regulator, 2023
- TMX latest cost estimate: C$34 billion (analyst note) RBN Energy, 2024