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2/27/2003



Rail News: Rail Industry Trends

KCS promotes fuel-conservation practices


Similar to all Class Is, Kansas City Southern is trying to find ways to manage fuel costs. Because the railroad's average per-gallon price increased from 68 cents last year to a current $1.09, fuel purchases now account for 12 percent of KCS' expenses compared with 8 percent in 2002.


Although KCS hedged fuel purchases for the first and second quarters — locking in current prices for future fuel use — the Class I hasn't hedged any fuel for the third and fourth quarters, and doesn't plan to pass on higher diesel expenses to shippers.


"Contracts with our customers do not allow for fuel surcharges, and the effectiveness of fuel surcharges on the rest of our customers is spotty," KCS officials said in a prepared statement.


To control costs, the railroad plans to practice and enforce locomotive fuel-conservation measures, such as coasting, throttle modulation, train pacing and dynamic braking, and engine shut-down.


Per trip, planned stops using dynamic and train-air brakes can save 31 gallons; train-speed reductions with dynamic braking, 25 gallons; slack-bunched stopping without dynamic braking, 32 gallons; and throttle modulation, 41 gallons, KCS officials estimate.


"Unnecessary locomotive idling is literally money going up in smoke," KCS officials said.


CSX Transportation's diesel expenses are rising, too. The Class I expects first-quarter fuel expenses to increase $35 million over first-quarter 2002's $116 million.












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