So once again the nation and its economy are facing the risk of a massive freight railway strike, this one as early as December 9th. But the one thing you don’t have to worry about is whether it will affect your holiday shopping. plans. (This will not be the case.)
A prolonged railroad strike could create all types of shortages, from gasoline to food to automobiles, and cause the prices of all types of consumer goods to soar. It can screw up the commute of tens of thousands of workers who take the train to work, slow down the delivery of parts and force factories to shut down. But one area that most likely won’t see immediate or severe disruption will be Christmas.
“Things that need to move for the holidays have already been transported by rail,” said Balaji Guntur, vice president of the transportation practice at global consultancy Kearney and a logistics veteran. Merchandise that retailers are counting on for the holidays is already in nearby stores or warehouses.
“Christmas isn’t canceled,” Brian Dodge, president of the Retail Industry Leaders Association, told CNN in a phone interview earlier this week. Its group includes Walmart (WMT), Target (TGT), Home Depot (HD) and dozens of other major brands.
A previous strike threat in September was likely to cause bigger problems with goods destined for holiday sales, but that strike threat was averted by a tentative 11-hour labor deal. But that strike threat has returned, worrying shippers, after rank-and-file members of four rail unions rejected earlier tentative agreements. Negotiators from both sides are back at the table.
While the railways say they hope to strike new deals, they have so far rejected demands that union negotiators say their members want.
A strike would “completely disrupt the supply chain,” Dodge said, adding that concern among retail CEOs is “high” due to the growing risk of a nationwide railroad strike. About 30% of national freight, measured by weight and distance traveled, moves by rail, and there simply isn’t enough capacity on trucks or other modes to move that freight if railroads iron stop.
And a rail freight strike could cost the US economy $1 billion in its first week alone, according to new analysis from the Anderson Economic Group. “The calculations show a first-day impact of approximately $60 million, including $30.9 million for lost freight, $3.8 million for long-term disruption to passenger rail and $25 million for dollars in lost wages in the rail industry,” the analysis revealed.
Strike losses for the second and third days would rise to $91 billion a day due to loss of agricultural products and spoilage of food. Costs would increase from there.
Many people expect Congress to step in, either to order railroad workers to stay on the job or get back to work quickly in the event of a strike, because of such serious economic ramifications.
Unions oppose congressional intervention, saying risking a strike is the only way to get the railroads, many of which posted record or near-record profits last year and doing so again this year, to meet workers’ demands for better working conditions, including sick pay policies common to most workers in other industries.
But if a strike does start and drag on, here’s how it could affect other industries, and many Americans:
Refineries obtain most of their crude oil through pipelines and ship most of the products they produce, such as gas, diesel and jet fuel, through pipelines. Yet tank cars are a key part of this process.
Almost all of the ethanol that goes into gasoline is transported by rail; gasoline would not comply with certain environmental regulations without it. But even if those regulations could be lifted, the cost of a gallon of gasoline without ethanol would increase by about 16 cents due to the loss of tax breaks, according to Tom Kloza, global head of energy analysis for OPIS.
Pipelines carry most of the country’s crude oil to refineries, but every day about 300,000 barrels are moved by rail, a volume that would supply about two medium-sized refineries, according to data from the American Fuel and Petrochemical Manufacturers, the business group for refineries. Many chemicals used in the refining process are also transported by rail, as are some low-grade products and waste.
“If railcars don’t come regularly to pick up products from the facilities, including the sulfur that refiners remove from crude oil, production will have to be curtailed,” the refineries trade group said earlier this fall.
Food prices may not be as negatively affected by an early December strike date as they would have been in September amid the fall harvest. But cereals and other food products still need to travel by train.
That, coupled with low water levels on the Mississippi that have slowed barge traffic amid a drought in the Midwest, has made the nation’s agriculture industry very worried about a possible strike.
“Any further disruption to rail service would have an immediate impact on the nation’s food and agriculture and broader supply chains,” said Mike Seyfert, CEO of the National Grain and Feed Association. “The risk in domestic and international markets is real.”
December is a big month for auto sales. But car and truck production is currently hampered by a shortage of many critical parts, including computer chips which, in turn, have created a shortage of vehicles available for sale on dealer lots. This is why car prices are now at record highs.
But that’s nothing compared to what would happen with a prolonged rail strike. About 75% of completed cars built in American factories or imported here are transported by rail. The same goes for many parts used to build vehicles, moving between suppliers and car assembly plants, and production will quickly come to a halt if those rail links are cut. It would take time to make up lost production, creating upward pressure on car prices.
Most factories aim to have parts and raw materials delivered just before they are used on the assembly lines – a process known as “just in time” delivery. Many factories rely on rail to receive these parts and supplies and then ship them for delivery.
“We are already facing economic turmoil with rising costs, product shortages and high inflation. Any nationwide rail strike or shutdown will cause even more economic pain,” a statement from the National Manufacturers Association said earlier this month, adding that avoiding a strike is crucial.
A long railway strike could lead to temporary plant shutdowns, which has happened in the global auto industry in recent years due to shortages of parts and computer chips.
Only the country’s freight rail lines face an impending strike, but commuters would likely be affected as well. Many commuter trains travel on tracks maintained and operated by freight railroads, and passenger railroads expect to have to shut down operations once the freight strike begins.
Amtrak cut service on most of its long-distance trains in the days leading up to the September 16 strike deadline. The company owns about 700 miles of track, mostly between Boston and Washington, DC, but about 97% of its 22,000-mile national network runs on freight lines.
Many commuter railroads also run on freight rail lines and could not operate if a strike were called. That could mean more commuters driving to work, and more traffic and congestion, even for those who don’t normally take the train.
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