OAT : Open Access Thread

[jeaton]

QUOTE: Originally posted by Mark_W._Hemphill

Jay: Look at it the other way around: Rail rates (as well as logistics cost as a whole) have a great deal to do with moving manufacturing offshore, because they are so *low.* High rail rates encourages manufacturing to be located very close to the point of consumption. Low rail rates encourages manufacturing to be located in low-cost places, even those at a great distance from the point of consumption. Those who want even lower rail rates than we already have would encourage the offshoring of even more things that are still manufactured in the U.S. of A.

Good point, Dusty One. That thought has not escaped the Asian state owned or subsidized steam ship lines either. At least ages ago, east bound Pacific rates were lower than westbound.

Jay

[tree68]

QUOTE: Originally posted by CSSHEGEWISCH

The last time I looked, tolls per vehicle were not equal. Trucks and passenger cars pulling trailers pay by the axle, passenger cars pay a little less than a two-axle truck.

Very true, but my the toll for my GMC is the same as for your Expedition, even though I'm a poor working *** from the boonies and you're a hometown business magnate.

QUOTE:
At any rate, if all trains paid the same toll, that implies that a high-priority UPS Z-train would pay the same as a local handling non-priority carload traffic.

There was some discussion about that earlier - I think ton-miles was mentioned. You could use axles, for that matter. But yes, if the local carrying non-priority carload traffic was the same length and weight as the Z-train, then its toll between points A and B ought to be about the same. Special handling (which could be defined as either the Z train or the local) might have to pay a premium for special handling.

QUOTE:
Another issue that hasn't been addressed is the start-up costs involved in setting up an operating company. That could be quite a deterrent to setting up a competitor if you don't like the rate charged.

New subtopic, but I'll throw in my opinion. It's no different than starting any other company. There will be capital costs, training, etc. You may very well find a booming market amongst the start-ups for leased equipment and retired RR men (and women). Since the rate charged for track use should be uniform (given the variables that have been discussed), that part should be one of the known values on the balance sheet. It would be nothing more than operating overhead. Not likely you'll see the big boys with immediate competition, but UPS didn't start out worldwide, either. On the other hand, it's already been opined that a JB Hunt or Schneider, or even someone like UPS or Fedex might foray into the business, which could open up some interesting situations. You could see the current big 5 gone, replaced by companies who have learned to work with the new paradigm.

[CSSHEGEWISCH]

The last time I looked, tolls per vehicle were not equal. Trucks and passenger cars pulling trailers pay by the axle, passenger cars pay a little less than a two-axle truck.

At any rate, if all trains paid the same toll, that implies that a high-priority UPS Z-train would pay the same as a local handling non-priority carload traffic.

Another issue that hasn't been addressed is the start-up costs involved in setting up an operating company. That could be quite a deterrent to setting up a competitor if you don't like the rate charged.

[tree68]

QUOTE: Originally posted by CSSHEGEWISCH

2. Since the operating companies would be unregulated, how would you control rates if a particular line has only one operator?

In theory, any particular line would not have just one operator. Even if it did, the threat of another operator potentially coming in should help keep haulage rates in check. The cost to operate over the track should be equal for all users. That's why they would be regulated. It's essentially the same as a toll highway - my car pays the same as your car, no matter who either one of us is.

In practice - it's hard to say how things would play out.

[MichaelSol]

News Item, March, 2004

"UP Screwing up UPS' Bullet Trains and shipping by Truck

"The word is starting today and going for at least four weeks UPS on UP will be operated as follows:

"Hot day traffic between Little Ferry, NJ and Los Angeles will be trucked at UP expense in both directions. That would be the Tuesday bullet trains on UP and CSX.

"Hot day traffic between Memphis, Dallas and Los Angeles will be operated over the highway at UPS expense.

"Cold day traffic between Los Angeles and Bergen (20 to 40 trailers per day, four days per week) will be handled by BNSF.

"BNSF is almost at capacity on its transcon and does not want this business back. The business growth is overwhelmingly China boxes and U.S. truckload stuff - not high priority goods. With more and more of these 8000-foot double stack trains running on the Transcon, it's harder and harder to keep them moving when the Z trains are overtaking them every hour. The UPS NYC-LA business that BNSF is again hauling for at least the next four weeks will be added to existing Willow Springs-Los Angeles trains.

"This is all happening because UP is having another meltdown on the Sunset Route in and out of LA in general. On Sunday it is reported that 55 trains - 30 westbound and 25 eastbound - between El Paso and Long Beach that were either sitting on sidings or waiting for a chance to leave Long Beach. Is the Alameda corridor not working. Yet they can get engineering specials over the road in record times."

Mark is correct that the shipping costs are low. They have fallen from an average of 5.5 cents per ton-mile during the decade prior to the Staggers Act passage, to an average of 2.2 cents per ton mile today.

The cause of this is not an entirely positive one. Railroads have not engaged in equilibrium pricing, but rather market share pricing. This continually locks them into permanent price wars which, ultimately, hurts both the railroads and the customers. The railroads because they cannot earn cost of capital, and the customers who cannot obtain reliable service, while at the same time being subject, as Mark says, to market and capacity distortions offered by artificially low rail rates (for some) which discriminate against those customers who might otherwise build factories and maintain local employment.

By implication, this damages the US economy as a whole, as artificially low rates on existing traffic beget more traffic operating against existing domestic industry, which in turns begets more rail traffic as domestic industry after industry falter and fail because of market distortions perpetuated by the US Rail industry and its pricing policy, not by China. Yes, "we have met the enemy ....and he is us."

For 40 years, GM used market share pricing. The ultimate result was failure. Toyota used equilibrium pricing. The ultimate result was success.

If there is an advantage to OA, it might be that it permits (imposes) a more rational pricing model.

Best regards, Michael Sol

[jeaton]

I am not going to say that railroad capacity problems, however caused, don't have an impact on the economy. However, Harris County Judge Eckels' statement of the impact on the national economy may be a little over the top.

The following is from the Federal Reserve's Industrial Production Index showing the percentage increases of the index for the indicated period.
2002 0.88%
2003 2.10%
2004 4.00%
10/1/04 to 6/1/05 2.58%

I am just not going to accept the idea that the rates and charges of railroads or any other mode have much if anything to do with the movement of manufacturing offshore. This is anecdotal, but I know of one company that moved its manufacturing to China, but still distributes its product from their central US location. In other words, freight from China to their distribution point is an incremental addition to their total freight bill. I guess they must have found some other reductions in cost to make the deal work.

My point was that the suggestion that the larger trucking companies are currently blocked from efficient use of intermodal service because of the arbitrary behavior of the railroads is just not consistent with reality. 30 years ago, UPS was being very specific as to the train service they required, when to depart and when to arrive, and wouldn't hesitate to point out that a suggested rate was too high to get the business. I am sure they are now no less demanding and I am also sure that many other large truckers, beside those I mentioned, are using rail service on terms that they have defined.

[bobwilcox]

QUOTE: Originally posted by MichaelSol
Several shippers have joined with Burling ton Northern to propose the creation of a new line in the Clear Lake area.

The Clear Lake (rail station Bayport) shippers working with their politicians, the UP and the BNSF have gained access to the BNSF. They are now served by two railroads.

Montana should borrow some Texas politicans and give their current batch time on the bench.

[CSSHEGEWISCH]

To FM;
1. Where would the money come from for the "equalized" right-of-way funding of which you speak? Tax funding to a private operation (the infrastrcuture owner) would not sit too well in the current political climate. Also, how do you determine when such right-of-way funding is "equalized"?

2. Since the operating companies would be unregulated, how would you control rates if a particular line has only one operator?

3. Most trucking operators have elected to deal with driver shortages and high turnover as part of the cost of doing business. Why would they choose to deal with the devil they don't know (rail operations) instead of the one they do know (truck operations)?

[daveklepper]

It would be possible to imagine an all-rail economy, a railfans dream world. Suppose there was no such thing as personal automobile transportation. None. I'm not saying I'd like this anymore than any of you. I'm just saying suppose. Farmers would have trucks to get things to market. Other than that. rail rail rail. All roads of any importance would have an interurban line at the side of the road and all major streets in all cities and towns of any size whatsoever would have streetcar service. Amtrak would be running possibly 100 times the number of trains they are running today. And in addition, what the South Brooklyn Railroad did on the streets of Brooklyn and the Manufacturer's RR (a NYNH&H subsidiary of course) did on Connecticut Company streetcar tracks in New Haven would be done in every city. The number of private owner sidings would be about 1000 times the number that exist today. Such an economy could exist and might provide a high standard of living. But it aint so. Highway transportation is here, here to stay, is the main way most people and most goods get about, and the questions is how most usefully to benefit the entire economy can rail transportation fit in this picture. We we look at the question of open access from that angle we might make some progress. Any change should benefit the whole economy, including most of those providing barge and truck and bus services.

[Anonymous]

QUOTE: Originally posted by MichaelSol

Originally posted by jeaton
A takeover of Southern Pacific Railroad in 1997 leaves Union Pacific as the owner of most of the rail lines through Houston. Several shippers have joined with Burling ton Northern to propose the creation of a new line in the Clear Lake area. A court ruling blocking this proposal has is being appealed.

Best regards, Michael Sol

Not that that means OAT would work for them since the infastructure is overload (I am assuming) means instead more or new track is being seen as the answer, be it BNSF or UP or someone else. So how would Michael's response apply to OAT FutureModal? Not a sarcastic question, just wanting to try and understand this idea better.

• Reply
• Edit