Norfolk Southern To Adjust Fuel Surcharge

Trains Magazine General Discussion
1

April 24, 2006

Norfolk Southern To Adjust Fuel Surcharge

NORFOLK, VA. – Norfolk Southern Corporation (NYSE:NSC) today announced that, effective July 1, 2006, Norfolk Southern will revise its fuel surcharge program for local and joint-line non-intermodal traffic originating and moving on Norfolk Southern-issued tariff and public quotes issued on or after July 1, 2006. The fuel surcharge is based on the monthly average price of West Texas Intermediate Crude Oil (WTI Average Price), an industry standard for tracking oil prices. The traffic moving under these tariffs and quotes comprises approximately 6% of NS’ total revenue base.

Fuel prices have reached a level that Norfolk Southern believes is likely to be sustained. Tariff prices, public quotes and the fuel surcharge are being adjusted to reflect this level.

The new fuel surcharge for public price authorities will be 0.3 percent of the line-haul freight charge for every $1.00 per barrel, or portion thereof, by which the WTI Average Price exceeds $64.00, starting at a WTI Average Price of $64.01.

This will replace the current fuel surcharge of 0.4 percent of the line-haul freight charge for every $1.00, or portion thereof, by which the WTI Average Price exceeds $23.00. Additional information on the tariff prices, public quotes and fuel surcharge will be posted at www.nscorp.com.

Norfolk Southern Corporation is one of the nation’s premier transportation companies. Its Norfolk Southern Railway subsidiary operates approximately 21,200 route miles in 22 states, the District of Columbia and Ontario, Canada, serving every major container port in the eastern United States and providing superior connections to western rail carriers. NS operates the most extensive intermodal network in the East and is North America’s largest rail carrier of automotive parts and finished vehicles.

http://www.nscorp.com/nscorp/index.jsp

Dave

2

I must not be reading this correctly. Wouldn’t this cause the surcharge total to go down?

3

Thats what it says Murphy. Of course freight rates aren’t going down. Just that some of what was fuel surcharge is now in the basic freight rate.

4

The floor is $64/bbl for crude, so if crude goes below that, NS wins. But, if diesel goes up because of refining shortage and crude stays low, NS loses.

5

NS is adjusting its base rate to better represent economic reality. Unfortunately, they may well be correct in assuming that the price of raw petroleum won’t drop below $64/barrel. Note that the fuel charge continues if the price of petroleum exceeds that mark.

6

No doubt the troops have been instructed to get the old surcharges, below $64, into the base rate. The NS has always prided them selves on short term contracts. Therefore, these changes can be implemented fairly rapidly.