Tuesday, October 24, 2006

Fuel Surcharge: Still an Ugly Situation

Might get worse, too. Although this has been discussed here previously, I had my interest picqued again when I overheard a CSX employee comment on the recent 3rd Quarter Report. Mention was made of the upbeat nature of President Ward's comments, and that the issue of Fuel Surcharges was brought up in a way that indicated that changes might be on the horizon. You won't find such comments in the Report, however.

Customers are generally upset with some of the stunts that railroads are pulling these days. Bad feelings are resulting in the dreaded "R" word being bounced around. In this case, the bad word is "Reregulation".

Of course, the railroads don't like anyone messing with their situation.

Here's an example of why shippers are getting more and more vocal. Consider the BNSF, and its Fuel Surcharge on Intermodal Shipments. If you check out this article and click on the links to previous year's surcharges, you will find that these surcharges have ranged from a low of 4% to a high of 22.5%. Right now, it is hovering around 17% to 18%. You can also find out some of the complicated methods used to determine what this percentage is.

Customers have a tough time dealing with that large of fluctuation in tariffs. Pick your commodity, and it is easy to see why there might be issues with such fluctuations.

So what should be done? The quick and dirty way to start these Fuel Surcharges was to simply add the percentage onto whatever tariff was in place. Now, there is discussion about mileage based surcharges. Forget all of that.

The easy way is to change the basic tariff! Admit that fuel prices are NOT going back to the historical lows of a few years ago. Just raise the tariff, and get back to some surcharge that hovers around the 2% to 5% range. No one will be frothing, and no use of the "R" word will happen.

If fuel prices change dramatically, then simply change the basic tariff again. Isn't that what deregulation was supposed to allow in the first place?

The whole idea was so simple that it was even proposed here, and some time ago, too. The choice for Railroads is easy, do something that works, or face some government intervention of some kind down the track.

Thursday, October 19, 2006

Election 2006

Everyone has something to say about elections and the political process, especially during these days leading up to an election. And so do I.

I get extremely frustrated when politicians attempt to take the moral "high-ground". Makes no difference, Republican or Democrat. Candidates from both parties routinely do this during speeches and as part of advertising campaigns. But most voters are now becoming aware that no politician or party has a right to claim an elevation that places them on a higher righteous plateau than the opposition. Just remember, politicians rank somewhere between Used Car Salesmen and Lawyers in most polls concerning ethics.

A very wise political observer once shared with me a very salient observation. It goes like this: "There are only two types of politicians, and it isn't Republican or Democrat, or Liberal or Conservative; one politician has been elected, and the other politician wants to be elected. It's as simple as that." Many elections later, I have learned how simple and brilliant this observation is.

Nothing more needs to be written on Rip Track concerning this election.

Saturday, October 07, 2006

The "D" in DM & E is Not for Daschle

All of us in the supply side of the railroad industry, as well as many others, know that the DM & E is a common reference to the Dakota, Minnesota and Eastern Railroad. This is the line that has tried to get a track into Wyoming's Powder River Basin for something like ten years, now. If they get permission for the proposed line, half will be a significant rebuild of existing trackage, and half will be totally new construction, which will add even more pressure to the RR suppliers, as previously noted here. The DM&E's material and machinery requirements are that significant.

The BNSF and UPRR obviously would rather the DM&E be held out of the Powder River, which would allow them to maintain a hammerlock on all coal shipments. These two Class One Railroads have made no bones about that fact, but the problems that came up last summer with degrading track conditions did their case no good at all, as it allowed the DM&E to make a point that Wyoming's Powder River Basin Coal needs another railroad shipping option. All this is no secret, and is typical of past and present railroad competion.

What is also well know is that one of the last remaining pieces of formal opposition is provided by a group headed by the Mayo Clinic of Rochester, Minnesota. The DM&E runs in close proximity to the Clinic, and their worry concerns how an increase in coal train traffic will impact their facility. The Mayo Clinic Group has gone so far to enlist and include several other ranchers down the line, hopefully to add to their legitimacy.

Much of this is all reported in a good article in the November issue of Trains Magazine.

What is not reported by Trains Magazine, or anyone else in the MSM that I can find, is how former South Dakota Senator, Mr. Tom Daschle, may be involved with the Mayo Group. Why might that be the case? Perhaps it has to do with hard feelings that Mr. Daschle still harbors, having lost his seat to Mr. John Thune in November 2004. Since his election, you will recall that Mr. Thune spearheaded an amendment that assisted the DM&E in its effort to gain permission to build their line.

Would Mr. Daschle be so much of a sore loser to do such a thing, to help deny the DM&E permission for their line? Rumors say, yes, indeed. Someone needs to confirm or deny these rumors, and then report. Hard to believe that Mr. Daschle would put his own self esteem ahead of his former constituents, but if true, those former constituents and current fellow South Dakotans should know the truth.