Gas Prices and Freight Railroading

Hi,

When I was driving up the road and saw a regular gas price at 3.09 per gallon in New Jersey, it got me to think that maybe this would actually help the railroad industry. Is there a link between high gas prices and more traffic on the railroad? I would say that truck companies would want to use the railroad to save on high fuel prices.

Bill

PlayMania wrote:Hi,

When I was driving up the road and saw a regular gas price at 3.09 per gallon in New Jersey, it got me to think that maybe this would actually help the railroad industry. Is there a link between high gas prices and more traffic on the railroad? I would say that truck companies would want to use the railroad to save on high fuel prices.

Bill

Truck companies don't want to use the railroad. Thats their competition. It's the shipping industry that would consider the railroad.

In the West you see solid freights with J. B. Hunt, UPS, Yellow Freight, and other trucker's trailers on them. Starting in the late 1980s many truck executives cited that they can't drive a rig from Chicago to LA as cheaply as what they pay a railroad to carry the same trailer for them.

In the fuel cost run up that started two years ago, more and more truckers used railroads for their long haul.

So, yes, it does have an impact. With Asia recently surpassing Europe in total oil consumption (and it is increasing at about 8-10%) per year, we can easily see $100/barrel oil in a few years. Railroads are currently constrained on capacity for all they are carrying today.

I would think that the railroads both passenger and freight would benefit from high gas prices

northjerseybuff wrote:I would think that the railroads both passenger and freight would benefit from high gas prices

Freight railroads, yes, but not so much with passenger railroads. This is because passenger railroading is so rarely profitable; if you're taking a loss per rider to operate the trains, more riders just means more losses. I think that NJT put this forward as part of their justification for the fare increase, even though it seems somewhat counterintuitive ("Wait, you have more riders (therefore revenue) now than ever, but you still need to raise fares?!").

NJT's reasoning was the need to acquire new infrastructure to accomodate the growth. To the extent existing trains would be able to increased ridership, passenger rail would benefit as well.

High fuel prices don't neccessarily help rail freight, or truck freight. Both rail and truck companies may add surcharges to contracts or delivery thus wiping out any advantages either may post. Also, these companies often buy fuel on contract which is both plus and minus. While an existing contract may be below current retail, the next signing will only reflect an increased cost; there are some contracts, too, that will aslso automatically adjust up and down at certain stages. But the fact does remain: fuel prices are increaseing (Exxon-Mobile: lower revenues, higher profits) and other means of transportion (other than highway) has to get ready to absorb the increase anticipated traffic.

This topic is not just limited to New Jersey, so I moved to General Discussion: Railroad Operations and Facilities.

-otto-

The decline of railroads from the dominant position they once held as the only source of freight transport took many years, the recovery of much of that business will also take a long time, but the implications for our rail infrastructure are enormous.

Long-distance trucking begn in the years immediately following World War I, and most of the major players at the high-water mark of regulated trucking (c. 1970) could trace their origins to that time. Most began by seeking (and gaining, to the point of near-total domination) relatively small shipments of high-value freight -- the name "Roadway Express" was a takeoff on the old Railway Express Agency.

But it seems that no sooner was the concrete dry on the newly-completed Interstate Highway System than the agitation for deregulation began in the late 1970's, and the rail industry quickly got on the bandwagon. The hundreds of local motor carriers, supported by arrangements for interchange, dwindled to a handful of super-carriers.

At the same time, pressures from many drivers for a system of scheduling that allowed more flexibility than the regular-route relay-based system dominant until 1980 gave rise to the irregular-route carrier such as Schneider, Werner, J B Hunt, etc. The growth of regionally-based "distribution centers" used by the mega-retailers also tended to base more dispatching on an out-and-back pattern of 600 miles or less.

To summarize, the pendulum has swung back to the advantage of the railroads for the very long haul, although the reduction in size of the average shipment likely implies that containers, rather than 100-ton separable cars, will become the vehicle of choice. The groundwork to regain much transcontinental perishable traffic, driven pramirily by a dearth of qualified and responsible drivers, is in progress, and I believe we could see the day when almost all shipments over 600 miles will move primarily by rail.