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[quote user="Andy Cummings"] [quote user="Bucyrus"]Assuming that power is available then, it seems there is no question that electric operation would be cheaper.  But there is a question about the payback and whether the capital investment would be justified by the payback over time.  The fact that it is not happening tells me that the answer to the question is, no.  But there is a tipping point on that question somewhere as oil prices rise.  We may or may not be anywhere close to that tipping point at this time.[/quote]  Folks — I've heard the claim made that electrification will never happen because railroads have the market power to pass fuel costs onto their customers via fuel surcharges. Thus, the benefits of electrification would go to shippers, not to railroads. The success with which railroads were able to pass high fuel prices on to customers in 2008 seems to bear this out. Further, because their competition (truckers) are less fuel-efficient as a general rule, by this theory, there would be no "tipping point," as Bucyrus refers to it. What alternative do shippers have but to pay fuel surcharges, however high they go, if the alternative is more costly still? On the flip side, if you're a shipper, it doesn't matter whether you're paying the railroads in the form of higher rates, or in the form of fuel surcharges; it's all money out the door. Thus, if electrification means lower fuel costs, and thus, lower fuel surcharges, railroads will look more attractive to shippers vis a vis trucks, and that could generate additional traffic, and thus, the revenue that would justify electrification. In theory. Be interested to hear you guys' thoughts on this subject. [/quote] Andy, I understand your point about there being no tipping point because railroads are able to pass on the higher fuel cost to the shipper.  But shippers then have to pass the cost on to the consumers, and consumers can reduce their consumption in response.  That is the alternative that you asked about above.  So the ability of the railroads to pass on the rising cost of fuel is not open-ended.  At some point, for example, the rising cost of electricity caused by the railroads passing on their added fuel costs for hauling the coal to make the electricity will cause consumers to use less electricity.   <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p></o:p> While it is true that electricity is more or less a necessity, there is still a lot of flexibility in how much is consumed.  What would happen to the railroad business if all consumers reduced their electric consumption by 25%?  Moreover, railroads haul a lot of freight that is not as much of a necessity as coal for electricity, so its consumption is even freer to be reduced.   So, I think there is a tipping point, despite the ability for railroads to pass on the rising cost of fuel.  However, it may not be wise for railroads to wait for that tipping point.  This is because, as they wait and continue passing on costs that ultimately fall on the consumer, it slows down the economy.  And as the economy slows, it causes the tipping point to move further away.  If the economy is too slow, and railroad business falls too far, option to electrify offered by the tipping point may simply disappear.  In other words, the business may be too slow to justify the investment in electrification.
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