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Rail Freight Traffic: An Analysis to Better Understand the Industry and the Factors that Influence Traffic

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  • Lewis, Paul
Abstract
Too often railroad industry officials and observers use aggregate measures and general statistics to draw conclusions about the railroad industry and public policy. A common claim by industry observers is to credit the Staggers Act of 1980, which deregulated the railroad industry, with the subsequent reduction in rail rates and the surge in traffic volumes. While the direct connection between deregulation and increased rail traffic is a commonly-held belief, this belief is based more upon conviction than analysis. The analysis presented in this paper starts with an overview of rail traffic volumes and then looks at each of the major freight commodities moved on the railroad. For the individual commodities, changes in market conditions and the response from the rail industry are examined in detail, showing a complex and more realistic picture of the industry performance since the passage of the Staggers Act. Contrary to the overall trends, the railroads have lost substantial traffic in many areas and are continuing to lose mode share with the truck. In the two areas where railroads made their most substantial gains in traffic, namely coal and intermodal, exogenous factors related to the general economy, world trade, and the location of resources were major factors. For some commodities that remain very well suited to rail transport, notably metallic ores, rail traffic declined dramatically because domestic resources were exhausted. For many general commodities, traffic declined and railroads lost market share to trucks. In fact, most commodities in the general carload freight group saw a drastic drop in traffic after deregulation and relatively stable shipments throughout the 1990s and 2000s. These stable traffic volumes were during a period of rapid economic growth and population increases. Despite positive trends on the demand side, the railroad did not gain significant traffic due to pressures from modal competition. The factors affecting rail traffic volume can be grouped into four interrelated categories: demand for commodities, production/supply of commodities, modal competition, and rail service. Of these four categories only service can be controlled by the railroad. The others are part of the broader marketplace and the railroad must cater to the market to attract traffic. This paper demonstrates that many factors are involved in the market for rail transportation. From a public policy perspective it can be very misleading to use general statistics of traffic volumes and rate trends to support certain factors such as deregulation. The omission of these factors results in an incomplete and misleading analysis of the industry and in the future this may result in misinformed public policy decisions.

Suggested Citation

  • Lewis, Paul, 2012. "Rail Freight Traffic: An Analysis to Better Understand the Industry and the Factors that Influence Traffic," 53rd Annual Transportation Research Forum, Tampa, Florida, March 15-17, 2012 207110, Transportation Research Forum.
    • Handle: RePEc:ags:ndtr12:207110
    DOI: 10.22004/ag.econ.207110
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    File URL: https://ageconsearch.umn.edu/record/207110/files/2012_98_Rail_Traffic_Factors.pdf
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    References listed on IDEAS

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    1. José A. Gómez-Ibáñez & Ginés de Rus (ed.), 2006. "Competition in the Railway Industry," Books, Edward Elgar Publishing, number 4213.
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    Cited by:

    1. Martland, Carl D., 2012. "Productivity Improvements in the U.S. Rail Freight Industry, 1980-2010," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 51(3).
    2. Martland, Carl D., 2012. "Productivity Improvements in the U.S. Rail Freight Industry 1980-2010," 53rd Annual Transportation Research Forum, Tampa, Florida, March 15-17, 2012 207088, Transportation Research Forum.

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