Railroad strike looming large over U.S. economy

A strike by the Brotherhood of Locomotive Engineers and Trainmen and SMART-Transportation Division union would be a giant, economy-snarling headache from coast to coast. 

The potential strike is already disrupting certain shipments; freight railroads said they are planning to halt the transport of hazardous materials and sensitive cargoes, such as chemicals used in fertilizer and chlorine for water purification, because they don’t want those sensitive materials stuck somewhere when a work stoppage begins. (I guess the hazardous materials and sensitive cargoes will just sit in place for a while.) 

Amtrak announced today, “While these negotiations do not involve Amtrak or the Amtrak workforce, many of our trains operate over freight railroad tracks. Because the parties have not yet reached a resolution, Amtrak has begun to make initial service adjustments in response to a possible freight railroad service interruption that could occur later this week.”

If you’re in the supply chain industry, you’re freaking out right now. We are approaching supply chain peak season, as stores want to have their shelves well-stocked for Black Friday and the holiday shopping season. Many retailers begin offering deals in early November, which means all of those goods need to arrive in September and October. UPS just announced plans to hire more than 100,000 seasonal employees, while the U.S. Postal Service announced its own peak season plans.

The economic reverberations would be far-reaching; as our Dominic Pino wrote yesterday, “a strike by SMART-TD and the BLET would still lead to a nationwide shutdown. Carriers can’t run without their roughly 62,000 employees combined, and workers represented by other unions would be unlikely to cross a picket line. A nationwide shutdown would cost $2 billion per day.”

Rail moves one-third of all U.S. exports and roughly 40 percent of long distance freight volume.

Oh, and what do you think happens to already-high electricity bill prices when coal stops moving by train?

A freight-rail strike could put gasoline prices back on the rise.

The American Fuel and Petrochemical Manufacturers (AFPM), a trade group for fuel producers, sent a letter to congressional leadership today urging Congress to intervene and prevent a rail strike. The letter says, “A railway strike and embargos on rail shipments have the potential to force production cuts at U.S. petrochemical facilities and fuel refineries, which could deplete U.S. gasoline and diesel supplies and drive-up fuel prices.”

The industry’s reliance on rail is significant. “Annually in the United States, over 2 million carloads of our members’ raw materials and products, including crude oil, natural gas liquids, refined products, petrochemicals, and plastics are transported by rail,” the letter says.

The AFPM called the independent recommendations from the presidential emergency board that Biden appointed to help resolve the dispute “a workable middle ground,” and it urged Congress to “take steps immediately to prevent a work stoppage.”

One of the primary things holding the inflation numbers steady right now is gasoline. If rail unions go on strike under the self-described “most pro-union president leading the most pro-union administration in American history” and send gasoline prices back up, Democrats had better look out for voter backlash in November

One of my readers follows this industry closely, and writes in:

Railroad strike on Friday? Better than even odds. Biden used his best tool in July by ordering a 60-day cooling off period which expires on Friday. He has no other executive card to play. Congress can impose another cooling off period, but good luck with getting that done by Friday.

Does anyone believe the Secretary of Labor has any pull with the BLE&T? Can anyone actually pick the Secretary of Labor out of a lineup?

I’ve talked to people across the federal government who – like me – deal with railroads on a daily basis. I’ve also talked with the Association of American Railroads. Everyone is holding their collective breath. Nobody wants to find out what happens when the trains stop running. Problem is, there is no silver bullet here.

A few career lives ago, I was a railroad freight conductor. Toughed it out for two years and quit for the same reasons the unions are complaining about today.

It would be painfully ironic if the presidency of Joe Biden, who constantly goes on about how much he loves trains and Amtrak, endured a painful and economically-disruptive railroad workers’ strike. You would also think that a Democratic president would have the ability to persuade union allies to not launch an economy-crippling strike six weeks before the midterm elections. But Biden’s presidency is full of unpleasant surprises.

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