HIGHLIGHTS FROM THE AUGUST 2008 ISSUE
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Commentary
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Holy fuel surcharge, Batman!
OK, it wasn’t really a question. But the WSJ’s tongue-in-cheek way of stating that the railroad industry is moving in the opposite direction of the economy is what Railway Age has been saying for years: Railroads are back, and they’re here to stay—even if fuel prices drop dramatically, which isn’t likely to happen.
Bear in mind that the railroads are dealing with the same fuel cost spike truckers and airlines and the general public have to endure. It’s superior fuel efficiency that provides railroads an advantage. Being the most efficient hauler of commodities like coal and agricultural products helps, too, because regardless of the economic climate, people in this country still need to power their homes and eat. Providing generally good service adds to the railroads’ advantage.
And now, the railroads are able to command what Wall Street loves: pricing power. They’re also able to recover most—not all—of their fuel costs, despite what others may tell you.
But wait! The railroads are turning a profit! Holy fuel surcharge, Batman, that’s evil! They must be stopped! Yes, cured (you can imagine the first four letters of that word in all-caps, if you like) of their greedy mindset! They’re out of control! Who’s going to save the American people from this train wreck!?
Big government, perhaps, led by Captain Oberstar and His Mighty Reregulators (disguised as mild-mannered politicians)?
Those of you familiar with this industry’s history will realize that this isn’t the first time the railroads have been under siege, as Senior Editorial Consultant Luther S. Miller, who has witnessed the fall and rise of the railroads first-hand since before he joined Railway Age in 1958, describes in his report on reregulation.
For some perspective, let’s turn back the clock 104 years to the pages of this magazine, when a crusading President Theodore Roosevelt stood armed and ready, big stick in hand, to give teeth and claws to the Interstate Commerce Commission:
“It is well to have the President’s exact words in mind, for it is foolish to ignore the fact that they are going to carry great weight with Congress. Much stress is laid upon the distinction between vesting the Inter-State Commerce Commission with greater authority to fix rates which are called undesirable and giving it power of judicial review after it has investigated a previous rate with regard to which complaint had been made.
“This distinction evidently is intended to allay the fears of those who view extension of Federal control with alarm, but it is quite clear that it does not diminish the tremendous power which it is proposed to put in the hands of the commission, for the right to make the original rate would, of course, be equally subject to review by the courts.
“Here is a commission which cannot well contain a railroad man (the Inter-State Commerce Commission never yet has contained one, and public opinion is strong that it should not), yet it must be responsible for the most technical questions in regard to railroad traffic, with the all-important distinction from the work of actual railroad men that any mistakes it makes must be paid for by someone else.
“Such a commission would have to power to destroy or build up industries, lines of trade, but would be itself subject to political appointment. After the Northern Securities decision, President Roosevelt virtually announced to the country, through Attorney General Knox, that he did not attend to run amuck, but when one considers the majority by which [William] McKinley defeated [William Jennings] Bryan in 1900, it is terrifying to think what the Inter-State Commerce Commission might do in the hands of a President who did intend to run amuck.”
No, this isn’t 1904. These days, the railroads have plenty of competition, and they do have a strong case for wanting to be mostly left alone. But don’t be caught napping, because the Reregulators are ready to take you down, if you let them.
Copyright © 2007. Simmons-Boardman Publishing Corp.