# Oil and product pipelines: Unit economics

Huge build costs, cheap barrels: the economics of a full pipe

Source page: https://www.materialinsights.org/energy/e_oil_pipelines/economics/

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 km^[3](https://thundersaidenergy.com/downloads/pipelines-the-energy-economics/) | 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 barrel^[3](https://thundersaidenergy.com/downloads/pipelines-the-energy-economics/) | 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/MWh^[3](https://thundersaidenergy.com/downloads/pipelines-the-energy-economics/) | 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 barrel^[5](https://www.eia.gov/todayinenergy/detail.php?id=7270) | 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 CAD^[8](https://rbnenergy.com/daily-posts/analyst-insight/tmx-latest-cost-estimate-10-34-billion) | 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 barrel^[7](https://cer-rec.gc.ca/en/about/news-room/news-releases/2023/cer-sets-interim-tolls-for-expanded-trans-mountain-pipeline-system.html) | 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 delivered^[4](https://doaj.org/article/a1cfd5f303284f7db00d69a5aaced501) | 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 cost^[3](https://thundersaidenergy.com/downloads/pipelines-the-energy-economics/) |
| **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](https://thundersaidenergy.com/downloads/pipelines-the-energy-economics/) |
| **Cost overruns** | can double the toll: Trans Mountain's fixed toll rose from C$5.76 (2017 estimate) to C$10.88 per barrel^[7](https://cer-rec.gc.ca/en/about/news-room/news-releases/2023/cer-sets-interim-tolls-for-expanded-trans-mountain-pipeline-system.html) |

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

1. [Pipelines: the energy economics (analyst model, updated 23 July 2026)](https://thundersaidenergy.com/downloads/pipelines-the-energy-economics/) Thunder Said Energy, 2026
2. [Cost of long-distance energy transmission by different carriers (DeSantis et al., iScience 24, 103495)](https://doaj.org/article/a1cfd5f303284f7db00d69a5aaced501) iScience / DOAJ record, 2021
3. [Rail delivery of US oil and petroleum products continues to increase, but pipelines remain dominant](https://www.eia.gov/todayinenergy/detail.php?id=7270) US EIA, Today in Energy, 2012
4. [CER sets interim tolls for the expanded Trans Mountain pipeline system](https://cer-rec.gc.ca/en/about/news-room/news-releases/2023/cer-sets-interim-tolls-for-expanded-trans-mountain-pipeline-system.html) Canada Energy Regulator, 2023
5. [TMX latest cost estimate: C$34 billion (analyst note)](https://rbnenergy.com/daily-posts/analyst-insight/tmx-latest-cost-estimate-10-34-billion) RBN Energy, 2024

## Other sections

- [Summary](https://www.materialinsights.org/energy/e_oil_pipelines/index.md)
- [Overview](https://www.materialinsights.org/energy/e_oil_pipelines/overview/index.md)
- [Correlation](https://www.materialinsights.org/energy/e_oil_pipelines/correlation/index.md)
- [How it works](https://www.materialinsights.org/energy/e_oil_pipelines/explain/index.md)
- [Efficiency and losses](https://www.materialinsights.org/energy/e_oil_pipelines/efficiency/index.md)
- [Technology advances](https://www.materialinsights.org/energy/e_oil_pipelines/advances/index.md)
- [Value chain](https://www.materialinsights.org/energy/e_oil_pipelines/valuechain/index.md)
- [Geopolitics and regulation](https://www.materialinsights.org/energy/e_oil_pipelines/geopolitics/index.md)
- [Impact on the biosphere](https://www.materialinsights.org/energy/e_oil_pipelines/biosphere/index.md)
- [Relationships](https://www.materialinsights.org/energy/e_oil_pipelines/links/index.md)