PIPELINE

FACULTY OF COMMERCE
DEPARTMENT OF RETAIL AND LOGISTICS MANAGEMENT
NAME SURNAME REG NUM
BONAFIDE MUPOMBWA R174873E
MIRIRAI JASI R1610420N
SOLOMON MUJURU R173817Z
TINOTENDA JOEL MUDZIMU R171786V
LEVEL: 4.1
MODULE: TRANSPORTATION MANAGEMENT
LECTURER: MRS MAZWI
QUESTION: Why are pipelines unknown to many individuals, do you think they should be
advertised to change this?
Pipelines are a unique mode of transportation which moves large quantities of certain types of
fluids over long distances at relatively low cost. Pipelines transport petroleum, petroleum
products, natural gas and chemicals such as anhydrous ammonia which is used in fertilizer
and propylene used for manufacturing of detergents. Ownership of pipelines by oil
companies has continued to the present, but some oil pipelines are now owned by nonoil
companies. Also, joint ownership by several companies has become common because of the
large investment of capital necessary for construction. The pipeline industry is a large
component of our transportation industry with more than twenty percent of intercity ton-
miles, but it is largely invisible to many people. Pipelines should be advertised for they
provide safety and security, low operating costs and can operate in all weather conditions.
Pipeline are unknown to many individuals because pipeline industry has a small number of
very large carriers that dominate the industry. The oligopolistic nature of the industry is
demonstrated by the fact that twenty major integrated oil companies control about two-thirds
of the crude oil pipeline mileage. There are reasons for the limited number of pipeline
companies which are start-up costs are high and the economies of scale are such that
duplication or parallel competing lines would be uneconomic. Large-size operations are more
economical because capacity rises more than proportionately with increases in the diameter
of the pipeline and investment per mile decreases, as do operating cost per barrel. The
procedural requirements for entry and the associated legal costs also contribute to the limited
number of companies. An additional factor is the industry itself, which has been dominated
by the large oil companies that joined together in the post–World War II era to develop
pipelines from major fields and entry ports.
Pricing in the pipeline industry is unique compared to its major modal competitors that’s why
they are known by few individuals. First of all, pipelines do not use the freight classification
system that underlies the class rates of railroads and motor carriers. Even though pipelines
have high fixed costs, the differential pricing practices common in the rail and road industry
are virtually non-existent among pipelines. The nature of operation such as one-way
movement, limited geographic coverage of points and limited product provides little
opportunity to provide differential pricing practices. Pipelines quote rates on a per-barrel
basis for example one barrel equals 42 gallons. Quotes for rates are typically point-to-point or
zone-to-zone. Also, minimum shipment sizes, usually called tenders, are required; these
range from five hundred to ten thousand barrels. Pipeline rates are very low, which is
reflected in the fact that they carry about twenty percent of the total intercity ton-miles and
receive only about four percent of the total revenues.
Pipelines are specialized carriers and they transport a very limited variety of products. The
four main commodities hauled by pipeline are oil and oil products, natural gas, coal, and
chemicals. Pipelines are generally regarded as somewhat inflexible because they serve
limited geographic areas and limited points within that area. Also, they carry limited types of
commodities and only offer one-way service. Finally, the operations technology precludes
small shipment sizes. Due to commercial industries worldwide, the number of oil and gas
companies are however less than those of food, clothes and tangible stuff. People are not
familiarised with pipelines but rather road, rail, air and water as mode of transport.
Pipeline transport is unknown by many individuals for they are high in investment which
cannot be afforded by many individuals. The major exception is coal slurry pipelines because
the need to move the pulverized coal in water which makes it costly for the water is not
reusable. Coal pipelines use enormous quantities of water, which causes concern in several
western states where their installation has been proposed, because there is a scarcity of water
and the water is not reusable as there is no backhaul. Frequently, pipelines depend on rail and
roads carriers to complete delivery, which adds to user costs for example when coal arrives at
its destination water is removed and the coal will be transported by road to its final
destination which is to the plant.
Due to the use of automation and less labour many people are not exposed to pipelines as a
mode transportation. One example is the Trans-Alaska Pipeline System, built at a cost of $9.2
billion and operated by 450 employees as compared to motor carrier industry.
Pipeline should be advertised for them to be known by individuals though pipeline service is
relatively slow and has limited accessibility, but it is very reliable in terms of delivery with
little or no loss and damage. Pipelines have a very good loss and damage record. This record
is attributed in part to the types of products transported, but it is also related to the nature of
the pipeline service, which provides underground and completely encased movement.
Although the pipelines’ slow speed can be considered an advantage due to its use as a free
form of warehousing. Pipelines can provide a warehousing function because their service is
slow. In other words, if the product is not needed immediately, the slow pipeline service can
be regarded as a form of free warehousing storage for example products move through
pipelines at an average of three to five miles per hour.
Pipelines should be advertised for their dependability. They are virtually unaffected by
weather conditions and they rarely have mechanical failures. Although the service time is
slow, scheduled deliveries can be forecasted very accurately, diminishing the need for safety
stock. Risks are reduced for they are underground.
Although there is always concern about safety and the environment, pipelines have been a
relatively safe mode of transportation. The risk of terrorism is reduced when the pipelines are
buried in the ground.
Pipelines should be advertised to individuals so that they can be known for they result in high
profitability due to high capacity utilisation and low transportation costs. Pipelines are a
highly automated which reduces the transportation cost and it is an efficient form of
transportation. Oil moves in one direction in large volumes at a steady, slow speed. It can
transport large volumes at once for it has capacity.

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FACULTY OF COMMERCE

DEPARTMENT OF RETAIL AND LOGISTICS MANAGEMENT

NAME SURNAME REG NUM

BONAFIDE MUPOMBWA R174873E

MIRIRAI JASI R1610420N

SOLOMON MUJURU R173817Z

TINOTENDA JOEL MUDZIMU R171786V

MODULE: TRANSPORTATION MANAGEMENT

LECTURER: MRS MAZWI

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