Lower Oil Prices == more freight trucked?

It's not just fuel.  It's also an issue of personnel.  A two man crew can transport by rail what it takes 200  by truck.  Trucks are good for small deliveries at short distances - bulk shipping, regardless of gas prices, is significantly cheaper by rail.

The trucking industries is having real problems filling vacancies.  People just don't want to do that type of work anymore.

Mike:

I'm a 36 year shipper.  Low fuel costs won't have any impact on our modal choices.  If the products or customers are better handled by rail, that is how we'll do it.  If the reverse is true and the products or customers are better handled by tank truck then we will truck.

The only real impacts on either mode that can be directly related to lower oil prices and the resultant reduction in exploration and production, are fewer crude oil and sand shipments by rail and a bit of an easing in the truck driver shortage.   As oil field production has dropped, a lot of the drivers involved in servicing the oil fields are back handling other bulk products.

Curt

Meh, maybe for today, or next week. At some point, someone in the middle east will burp or fart and it will cause prices to skyrocket.

 

Most fuel isn't as "cheap" as it should be because of all of the taxes applied to it.

But lower fuel prices tend to be given as a reason rail revenues decreased.  

 

With the talk on other threads of mainlines through coal country being shuttered...like even maybe the Clinchfield...these lines should be cleared for double stacks...giving the railroads more routing options.  Lighter intermodal trains should make the grades easier than heavy coal trains too.  

 

I wonder how many shipping managers at large companies don't consider rail because they are uninformed that it is a relevant means to ship in the present day.

Open your eyes the next interstate trip.  A lot of effort put into those 52 footers to make them more efficient/aerodynamic.  Also keep in mind, the Prius, (Toyota, gas/electric hybrid) gets 50 + miles per gallon every day of the week, and maybe a little better with in-town driving, something as simple as turning the motor off, down hill.   Still tough to convince owners of SUV's, and pick-up trucks there is another way of life. Though, I was recently told a Chevrolet Suburban was $65,000 +. Those who use the least fuel in the shipping business, probably make the most money.  IMO

Mike CT

Recent trip to the great northwest from PA, and back, with the Prius, was $280 in fuel.  My C2500 Chevy two wheel drive pick-up get 12 miles per gallon versus the Prius at 50 miles per gallon. Nice to have done the trip in the truck, but that's $1,120 in fuel.  The world's changing, SLOWLY.

Mike:

 

I am guessing you have read one or two Wall Street reports indicating rail revenues have fallen as a result of lower fuel prices.  I mention one reason in my post above.  Another aspect, one I didn't think of when I posted my first response, is fuel surcharge "revenue".  All of the railroads have some sort of fuel surcharge they apply against each shipment.  Some use a mileage type surcharge that is based on a monthly average of the EIA's Retail on Highway national diesel fuel cost.  Others, such as NS, use a monthly average of the West Texas Intermediate daily price.  Regardless of methodology used, every rate has a base fuel component or price built into it.  The fuel surcharges are intended to cover only the increase between the fuel price component built into the rate and what the railroad is actually paying for its fuel.

 

Now; the railroads all purchase fuel in such huge quantities that they are not paying anywhere close to the prices used to calculate their fuel surcharges.  All of them were actually making a profit off the fuel surcharges applied against each freight movement.  As fuel prices have dropped, so has the railroads' ability to make money off the fuel surcharge.  By way of example, NS has three different basic fuel surcharge programs; one that starts at $40/bbl. WTI; a second that starts at $64/bbl.; and a third that starts at $90/bbl.  For the past year, rates using the $90/bbl. program have not had any fuel surcharge applied.  Since roughly January of this year, rates using the $64/bbl. program have not had any surcharge applied.  Since NS was making money off both programs, not being able to apply a fuel surcharge on shipments subject to either program has resulted in a loss of fuel surcharge revenue.  In this example, NS is still technically making money off the fuel, albeit in a roundabout way.  Rates subject to the $64/bbl. fuel surcharge theoretically have a fuel price component built in that accounts for NS' cost of fuel at a WTI monthly average daily price of $64/bbl.  Since the WTI has been trading more in the mid $40/bbl. range for most of this year; NS is, in effect, still making a profit off fuel since they have not dropped their base rates to account for a current fuel cost that is lower than the fuel cost built into the rate. 

 

What is surprising is how little flap this has raised among shippers. The "big lie", if you will, has always been railroads weren't covering their costs of fuel with their various fuel surcharge programs.  Once oil prices dipped to the point fuel surcharges either went away or dropped to next to nothing, the Wall Street geniuses were suddenly lamenting the loss of fuel surcharge revenue.  Kind of hard to plead poverty on both hands.

 

Curt 

Thanks for the clarification on my original concern.  I guess my thoughts were that cheaper fuel means that trucking is now cheaper...hence shippers would prefer to use it once the price gap narrows.  But of course the same fuel would be cheaper for rail as well and the efficiencies would still exist.    Clearly rail can meet..maybe exceed hwy speeds when intermodal is given the right capacity to work with and all else is in place.  ....for certain routes.

I had experience two different (Truck) shipping modes.

Direct service, usually by independent contractors. Factory direct to my shop/or the job site.  Usually required a fair amount of product (Light fixtures or switch gear, Generator/power source, the one every trucker hated, parking lot light poles), many times you were not the only customer on a 52 footer. I always said my prayers that my product was relatively easily accessible and that the truck drive had a good disposition. Oh yes!!, and spoke English.   All eventually determined amount of damage.  Filing damage claims and getting reimbursed was always a problem.  I had one very good journeyman electrician, who was an excellent mechanic, and could fix most any damaged light fixtures.  After two damaged claims, that seemed to take months to resolve, you/and the product supplier moved on to the better carriers.

 

Shipping via common carrier       Involved a fair amount of handling of the product.  Short haul, (factory to local truck terminal), Long haul, usually interstate travel, to another common carrier truck terminal.  Short haul, to my shop or the job site.  In general these were probably the better shippers, though you tended to get damaged product because of the (Three) load/unload cycles. 

 

Fitting rail shipments IMO would be difficult.

 

Most noted ah shoot!!  A delivery of tanning beds to a job site via a 52 ft., direct shipment.  Not only were the beds in the front of the box, they were double stacked, the length of the bed across the truck with 6" to spare each side. I had hauled our fork lift to the site, assuming the driver would tailgate the product, which seems to be a common trucker practice. Product (tanning beds) off the truck, via the fork lift, and into the building.  I convinced the young lady, she was from Quebec/spoke French, to re-direct to my shop were there was a loading dock/ I could drive the fork lift into the box. That usually never happens.  Not an easy unload, with a very old fork lift.  Then I had to re-load the beds on my trailer and haul them back to the job site. (Three different trips).  Fortunately no damage on the units.  Good customer, accepted an extra day of my time to shuffle the beds.