As grocery stores across the nation are experiencing shortages, having efficient transportation, like freight trains, to deliver grains, raw materials, chemicals that go into cleaning solutions, and other supplies is of utmost importance. Yet, the next stimulus plan, a proposed house infrastructure bill, could weaken the rail industry by mandating minimum crew sizes, regulating train length and more. On top of that, the Surface Transportation Board (STB) is also threatening to impose regulations, which according to a new study from the American Consumer Institute, would reduce railroad efficiency, ultimately hurting America’s response to deal with the coronavirus.
Throughout the nation, consumers are seeing empty shelves in grocery stores. From basic necessities like eggs, milk and even toilet paper, people are either forced to buy supplementary goods, or return to the store later and try again. Even large companies, like Amazon, are scrambling to hire thousands of employees to keep up with demand. With the rising unemployment rate and upward pressure on prices for items in short supply, Americans are looking for ways to stretch their dollar every way they can.
Yet, the empty shelves make us vulnerable to another problem — a transportation problem. With impending shortages at grocery stores, it’s of the utmost importance to make sure America’s supply chains are working at full capacity. However, potential regulations are threatening to strain the transportation industry.
For instance, the Surface Transportation Board (STB) proposed a few regulations last year, which would hurt the railroad industry while making prices soar for consumers. Regulations include EP 755, which could affect prices for shippers, while EP 671 would reduce railroad earnings. In other words, according to a study from the American Consumer Institute, “higher regulatory costs and risks will mean that rail carriers will invest less and that consumers will pay more for less.”
Yet, is there any reason for reintroducing these regulations? Since the massive rail reform happened in the 1980s, railroads became much more efficient, providing massively lower costs for shippers and lower prices for consumers. One study shows that between 1982-1989, real rail rates for food dropped 6.9 percent annually due to deregulations, as prices for farm commodities (-6.7%), chemicals (-3.9), and so on.
Since the deregulation of the railroad industry, American consumers have saved $10 billion on average per year. Yet, the STB is threatening to undo all of that based on faulty premises. The STB is doing so because it believes there is a market failure in the system. However, no evidence so far been presented that would justify such sweeping regulations.
Competition in the transportation industry remains intense. As trucking alone accounts for around 70 percent of shipments, the railroad industry is facing enough pressure to keep prices low for the railroad industry. Even the STB’s own commissioned economic analysis points out that operators “not appear to be earning above normal profit.”
If these regulations are imposed, railroad earning will plummet and rail transportation will slowdown, operators will become financially distressed, and investments will dwindle.
For the time being, regulations from both the STB and proposed house infrastructure bill threaten to rollback decades worth of progress on the railroad industry. Even worse, as the effects of the pandemic grow deeper, and with tighter checkbooks, Americans across the nation will be looking for affordable food.
As COVID-19 threatens thousands of American lives and with consumers and workers on the frontline, it is never a good time to impose crippling and punitive legislative and regulatory measures that would permanently damage the transportation supply chain.