This is why the risk of the first national railway strike in 30 years is so worrying for economists and businesses. A short break in work – some previous rail strikes lasted only hours – will probably not cause major economic disruption.
“In a week’s time, we see real damage in the US economy,” said economist Patrick Anderson of the Anderson Economic Group, who estimates the impact on job stoppages.
If it lasts a week, a strike will mean reduced gas production, spoiled crops, a stifled supply of new cars and empty shelves in stores over the holidays. Your commute may be growling. And for the workers, there may be temporary layoffs in the near future.
American railways remain crucial to keeping the American economy running smoothly. They carry nearly 30 percent of the nation’s cargo, measured by distance traveled and the weight of the cargo, according to the Bureau of Transportation Statistics. And there’s really no alternative if the trains stop running.
“The minimum of all 7,000 daily long-haul freight trains in the US would require more than 460,000 additional long-haul trucks each day, which is not possible based on equipment availability and the existing shortage of 80,000 drivers,” he said. Chris Spear, CEO of American Trucking in a letter to members of Congress calling for action to prevent a strike. “As such, any disruption to rail service will wreak havoc in the supply chain and fuel inflationary pressures across the board.”
Anderson said it is impossible to come up with a dollar estimate for the impact on the economy at this point, but said costs will rise geometrically the longer the strike lasts, starting at tens of millions of dollars and growing rapidly every day. .
“It might just be millions, but that’s a lot if it’s your job that’s being lost,” he said. “If we reach a week-long strike, we are in uncharted territory,” she said.
Refineries obtain most of their crude oil via pipelines and ship most of the products they produce, such as gas, diesel, and jet fuel, also via pipelines. But rail tank cars are a key part of the process of producing the gas that ends up in the tank.
Almost all the ethanol that goes into gasoline moves by rail. Without ethanol, gasoline would not comply with some environmental regulations. But even if those regulations could be waived, a lack of ethanol could increase the cost of a gallon of gas by about 16 cents due to the loss of tax breaks, according to Tom Kloza, global head of energy analysis for OPIS.
Although pipelines transport most of the crude oil to refineries, according to data from the American Fuel and Petrochemical Manufacturers, the commercial group of the refineries, about 300,000 barrels move by rail every day, a volume that could supply about two medium-sized refineries. size. Numerous chemicals used in the refining process also arrive by rail, and some lower quality products and waste materials have to be shipped by rail.
“If rail cars don’t arrive regularly to collect the plant’s products, including the sulfur that refineries remove from crude oil, production will have to reduce,” the refinery business group said.
The strike would strike at a particularly bad time for the nation’s agricultural industry. Data from the Bureau of Transportation Statistics shows that trains account for 27% of the distance traveled by grains when measured by weight.
“A train disruption on September 16 would strike just as the fall harvest accelerates in many parts of the United States,” said Mike Seyfert, CEO of the National Grain and Feed Association. “The economic damage along the food and agricultural supply chain would be rapid and serious”.
The railways began refusing to accept new shipments of grain starting Wednesday in preparation for a possible strike. If the work stoppage occurs, the grain workers will load what they can onto the rail containers located in their backyards. But they will not be able to move them or accept additional grain from farmers, who will then have limited options to sell their crops.
In recent months there have been improvements to farmers’ supply chain problems suffered during the pandemic.
“The gains we’ve made over the past seven to eight months will be largely undone if this strike occurs,” said Terri Moore, a spokesperson for the American Farm Bureau Federation.
Additionally, farmers preparing to plant for the fall season may see shortages of the fertilizer they need, as the railways have already stopped accepting shipments because in many cases they are classified as hazardous materials. This could damage future crop supplies.
“There would definitely be at least one price increase for consumers,” said Max Fisher, chief economist at the National Grain and Feed Association. “If our processing plants fail, food manufacturers who buy these ingredients will not have access to them for a long period of time. Depending on how long it would go on, we worry about scarcity: being able to actually get the food.”
Cars and trucks
But that’s nothing compared to what would happen with a prolonged rail strike. About 75% of the cars built in US factories or imported here travel by rail. There are nowhere enough trucks to carry so many vehicles.
In addition, many of these parts move by rail between suppliers and automobile assembly plants. Production will quickly stop if those rail links are cut off.
Eventually production would resume, but it would take some time to compensate for the loss of production. Which means more upward pressure on car prices.
The growl of container ships entering west coast ports is finally subsiding after years of delays and delays. And even though things have improved, they are still not “normal”.
As of Tuesday, the port of Los Angeles, the nation’s largest, said it had 27,000 containers waiting to be loaded onto trains. This is about three times as much as under normal conditions. Two-thirds of the current container inventory has been there for nine days or more, when no one should have been there for that long.
“Efficient rail operations are critical to the Port of Los Angeles,” said Gene Seroka, executive director of the port. “With two-thirds of our cargo leaving California by rail, the US supply chain and economy need all of us to work hard.”
The peak season for imported goods that go to retailers before the holiday shopping season is now. The National Retail Federation said last week that it was concerned about shortages later this year in the event of a rail strike.
“We are in the middle of the peak import season,” said the trading group. “Any disruption to the rail network this month could have long-lasting negative effects on this important sales season. Product delays and shortages are related to inflation.”
Most factories aim to have parts and raw materials delivered just before they are used on assembly lines, a process known as “just-in-time” deliveries. And many factories depend on the railways to get those parts and supplies, as well as ship them.
“For years now, American manufacturing workers have been suffering from the effects of rapidly rising material costs and severe supply chain disruptions,” says a statement from the National Association of Manufacturers. A railway strike “would devastate the movement of manufactured goods on which families depend”.
The rail strike could result in the temporary closure of plants, as has happened in the global auto industry due to the shortage of parts and computer chips caused by the pandemic.
Although only the nation’s freight rail lines face a pending strike, many of the nation’s commuter trains travel on tracks maintained and operated by freight railways. As a result, many passenger railways plan to close operations once the freight strike begins.
This could mean more commuters driving to work and more traffic and congestion even for those who don’t normally take a train.