Maritime Administration Releases Technical Report on the Impact of High Oil Prices on Freight Transportation

October 2008 report focuses on both the national impact as well as the impact in five critical corridor markets which include over 95 percent of the US population and an even higher share of its total production and consumption.


• MARAD Assessment: on Modal Shifts: Oil Prices May Encourage Shift to Water, Rail

Oil prices have fluctuated dramatically over the past six months, and were recently more than twice what they were five years ago. In order to understand the impact of oil prices on transportation markets and their logistics chains, the Maritime Administration sponsored a study that reviewed U.S. and international forecasts of potential oil prices and assessed how higher fuel prices would affect different modes of transportation.

The study found that the more fuel-efficient modes, such as water and rail, are less affected by rises in oil prices than trucking, particularly over long distances. The study also provides separate analyses of major freight corridors, and looks at the potential for increased use of Great Lakes, Mississippi River, and coastal services.

• THE PURPOSE OF THE STUDY

In recent months the price of oil has risen sharply and with it, gasoline, diesel, and fuel oil prices. The impact of these oil price increases is very strong as it flows through the U.S. economy. Firstly, its impact on production costs results in a reduction on the overall demand for goods and services in the economy. Second, its impact on transport costs is changing distribution systems and the ability of existing logistics chains to serve world markets. This second impact affects not only the hinterland and distribution systems of major markets, but also the relative competitiveness of the modes that serve those markets.

In order to understand the impact of oil prices on markets and their logistic chains, the Maritime Administration (an agency of the U.S. Department of Transportation) asked Transportation Economics & Management Systems, Inc. (TEMS) to evaluate the impact of oil prices on U.S. domestic freight transportation. The study first forecasts the potential range of oil prices in the short and long term, and then assesses how such prices would impact transportation logistics chains and evaluate likely changes. The analysis considers both the national impact as well as the impact in five critical corridor markets, as shown
in Exhibit 1. These five corridors include over 95 percent of the US population and an even higher share of its total production and consumption.