Railroads Gain Market Share as Fuel Costs Soar
Record fuel prices are shifting freight from U.S. highways to trains, boosting railroad companies' revenue and profits.
Railroad companies like Union Pacific, Norfolk Southern, and CSX are experiencing a surge in business due to the high fuel costs that are impacting truckers.
"Railroads are much more efficient... it's naturally an advantage," said Union Pacific CEO Jim Vena, attributing the shift to lower costs per ton for long-distance goods transport.
Higher fuel prices, however, are increasing railroad expenses, especially with the Iran war keeping fuel prices high. Diesel reached a record $6.53 per gallon in September.
The shift is most evident in intermodal shipments, where trains transport goods over long distances with trucks handling local pick-up and delivery.
The reduced trucking capacity due to a prolonged freight downturn is also contributing to the shift to rail.
"The truck market has certainly flipped this year... but recent tonnage levels confirm this is due to reduced capacity, not robust demand," noted American Trucking Associations' Chief Economist Bob Costello.
While railroads are facing higher fuel costs, fuel surcharges have helped offset some of the impact. Union Pacific and Norfolk Southern both reported year-over-year increases in revenue and expenses due to fuel costs.