As regulators prepare to evaluate a controversial railroad merger that would reverberate through the U.S. supply chain, the leading industry trade group sought to boost the chances of that deal’s approval by emphasizing rail’s critical role in the economy.
Analysis by the Washington-based Association of American Railroads (AAR) says rail acts to steady the supply chain compared to other freight modes.
“Freight rail is more than a transportation mode; it is a critical tool for controlling costs, mitigating inflation and keeping our economy moving,” said Rand Ghayad, AAR senior vice president of policy and economics, in a release. “This analysis shows those same advantages act as a shock absorber for consumers – keeping goods moving and costs predictable even during turbulent times.”
The study comes as Union Pacific (NYSE: UNP) and Norfolk Southern (NYSE: NSC) prepare to file their formal merger application with the Surface Transportation Board. The deal, if approved, would create the first coast-to-coast freight-only railroad.
The AAR said that analysis of three decades’ worth of federal data, industry metrics and case studies shows that railroads’ cost structure and operating model make them less vulnerable to volatility and better-positioned to recover from supply chain shocks.
Cost fluctuations are less likely to reach consumers compared to trucking, AAR said, since rail mostly serves manufacturers shipping bulk and intermediate goods instead of motor carriers’ last-mile and retail distribution.
The study also found:
- A 10% acceleration in trucking cost growth correlates with a 2.3% rise in goods inflation, with just a 0.7% rise from rail
- Trucking cost shocks typically hit consumer prices within one to two months; rail cost changes are smaller, slower and fade faster
The analysis highlighted rail’s resilience compared to trucking. During the port congestion fueled by the Covid-19 pandemic, rail transit times briefly increased but quickly normalized. Transit times on the Los Angeles–Chicago intermodal corridor peaked at six days but rapidly returned to 4–5 days, ensuring inland movement without further pushing up shipping costs.
“This resilience is built on sustained investments and long-term planning with customers across sectors such as agriculture and energy,” the study said. “Ahead of harvest season, railroads make forward commitments to absorb seasonal peaks and keep rates predictable, moving 25% of domestic grain and 40% of exports. In energy, rail reliably transports three-quarters of U.S. coal, helping reduce inflationary pressure on household energy bills.”
The group said rail’s fuel efficiency enables the average Class I railroad – the biggest by revenue – to move one ton of freight 480–500 miles per gallon of fuel, about three to four times more efficient than trucks.
“Since 2000, railroads have improved fuel efficiency by 22%, reducing exposure to energy price fluctuations. If just 20% of long-haul heavy-truck freight shifted to rail, annual savings could reach $13 billion in fuel and $11 billion in reduced congestion and highway damage – benefits that ultimately flow to shippers, taxpayers and consumers.”
Union Pacific and NS say the merger would help speed freight movement while reducing the amount of truckload freight on highways.
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Find more articles by Stuart Chirls here.
Related coverage:
Union Pacific delays rail merger filing
Ports warn intermodal in the crosshairs of rail merger
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BNSF on UP-NS merger: Don’t ruin a good thing
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