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Rail News: Rail Industry Trends

Fuel-price fluctuations not necessarily favoring truck over rail, UBS says


Although diesel prices continue to fall, shippers aren’t necessarily shifting their freight from rail to truck, according to UBS analysts.

Changes in relative pricing excluding fuel need to be considered as much as the effect of reduced fuel surcharges, the firm said in its “Railroads Weekly” report. In addition, shippers’ transportation budgets and the competing modes’ service-level changes are a factor.

“What we saw in the fourth quarter was tighter transportation budgets (favoring rails — they’re always cheaper in absolute terms) and substantially improved rail service, which more than offset lower fuel surcharges and falling truck prices [that] narrow the truck pricing premium to rails,” UBS analysts said in the report.

Expect more of the same in the first half, the analysts said, but with a slower pace of market-share shifts for rails because truck pricing is rolling over while rail rates still are climbing.

Contact Progressive Railroading editorial staff.

More News from 2/2/2009