We all are in the early stages fo what is supposed to be an approximetly 24 cent price increase on our already high gas prices. I had heard a while back that it costs the UP millions of dollars every time diesel fuel goes up a penny a gallon…wonder what this increase will cost UP, BNSF, NS, etc.?[:(!]
It is hard to tell since many contracts and tariffs have fuel escalators. After the Navy, the UP is the largest buyer of diesel fuel in the US.
I had read that the RRs sign contracts for delivery of diesel fuel at a set price for a set period of time. Do not remember if it said that there is a escalator clause nor do I know what the lenght of the contract is. I am sure though whenever the contract expires that the RRs will do what truckers will be doing which is implementing what the truckers call a “fuel surcharge”
It’s a mixed bag. If the higher fuel prices don’t dampen economic activity, then the RRs benefit by having lower costs than trucking, so some traffic will shift to RRs from the highway. But, if the higher costs dampen economic activity, then the loss in traffic will be greater than any gained from modal shift.
So far, the higher fuel costs have generally been benficial to the RRs since the economy keeps perking along at a decent rate.
Hedging pruchases and automatic fuel cost surcharges are all stategies the RRs use to to help manage fuel costs when the price seems volitile.