Like calorie-counting dieters seeking every possible edge to shed those few last, hard-to-shake pounds, Class Is continue searching for ways to curb their diesel appetite. That might appear to be a tall order for railroads that already consider themselves lean and mean from a fuel-efficiency standpoint.

But then again, there’s no better motivation than the harsh reality of soaring fuel prices, which now top $3 per gallon in the retail market and threaten to take some of the luster off Class Is’ record earnings and income. Fuel costs are the second-largest line item on large roads’ expense sheets, trailing only compensation and benefits. Fuel expenses soaked up 15.5 percent of the Class Is’ total operating revenue in 2006, up from 2005’s 13.5 percent, says Association of American Railroads (AAR) spokesman Tom White. Data from 2007 wasn’t available at press time.

And large railroads aren’t expecting any relief in 2008. BNSF Railway Co. underscored that point when Executive Vice President and Chief Financial Officer Tom Hund told Wall Street analysts during the Class I’s Jan. 29 earnings conference that higher fuel prices will account for about three-fourths of an expected 15 percent increase in first-quarter operating expenses.

A few days earlier, Union Pacific Railroad officials told analysts during a Jan. 24 earnings conference that they expect fuel prices this year to rise between 15 percent to 20 percent over 2007’s average price of $2.24 a gallon — no small matter for a Class I that consumed 3.6 million gallons of diesel daily in 2007.

The ripple effect of high diesel prices impacts much more than fueling locomotives, and the Class I can only recover so much from fuel surcharges passed onto shippers, says UP spokesman James Barnes.

“Increasing fuel costs have dramatically increased our costs of doing business, as well as our customers’ costs,” he says. “And a fuel surcharge doesn’t fully capture the higher prices we pay to fuel our own vehicles and track machines, or for heating and cooling office buildings and the like. In addition, we’re seeing higher costs in general from our vendors for their added fuel costs.”

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