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A railway revolution is supposed to be taking place in the oil patch. So far, though, it's more smoke than fire.

Shipping oil by rail rather than pipeline has become increasingly attractive because fierce opposition from environmental groups has stalled the construction of new pipeline capacity in Canada.

The Globe and Mail's Nathan VanderKlippe reported last year that even Enbridge Inc., the largest carrier of Canadian oil by pipeline, has acknowledged that somewhere between 10 and 25 per cent of domestic crude may be moving by rail by 2035. That's up from about 4 per cent now.

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The supposed rail revolution in oil transport would seem to suggest massive opportunities ahead for railways and their investors. But looking at the numbers for Canadian National Railway Co. tells a decidedly unrevolutionary story.

The company has increased its revenue from petroleum and chemicals transport by a healthy 7 per cent a year in the past five years, but total revenue from this segment remains less than 25 per cent of the total. The big surprise for the period was the 90-per-cent cumulative increase in revenue from shipping coal.

The 7-per-cent growth rate in energy-related revenues is significant but is hardly suggestive of a paradigm shift in Canada's transportation industry. If a true revolution were at hand, the growth rate would be much higher.

In the near term, investors tempted to add rail stocks in expectation they will immediately benefit from a new, land-based oil tanker business should reconsider the thesis, or at least their timing. There may be a point at which oil transport by rail increases at a double-digit pace that significantly boosts the bottom line for Canadian railways, but that time is not yet.

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