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How a rail strike could upend the economy

Poradmin

Nov 30, 2022

WASHINGTON – President Joe Biden, lawmakers and business leaders are warning of an economic crisis if the nation’s rail workers go on strike as scheduled next week, a move that would have far-reaching effects on the entire economy.

The railway workers will go on strike shortly after midnight on December 9 if an agreement is not reached before then. Biden is urging Congress to intervene.

Without congressional intervention and with talks between workers and rail operators seemingly at a standstill, businesses across the economy are preparing for a complete shutdown of freight and passenger rail systems. With a shortage of truckers, companies would be unable to shift their shipments, leaving the vast majority of products stranded.

How damaging a strike would be to the economy would depend on its duration, but a strike of just a few days could lead to a cascade of events that would disrupt supply chains for weeks, industry officials warn. The White House projects that up to 765,000 people could be out of work in the first two weeks.

«Businesses that are an integral part of our normal day-to-day lives, such as food and fuel manufacturers, will feel the impact immediately and reach consumers quickly,» said Jeffrey Hausman, chief product officer at supply chain management company samsara supply.

Here are some of the ways the United States would feel the effects of a rail strike:

Drinking water

One of the most direct impacts of a rail closure would be a potential shortage of clean drinking water for millions of homes that depend on publicly owned water systems.

Treatment plants use chlorine and other chemicals to clean the water that ultimately comes out of the tap, and the vast majority of those chemicals are shipped across the country by rail from factories to distribution centers.

«An interruption of rail service in the United States would have a catastrophic effect on the ability of water utilities to treat drinking water and wastewater and to perform other water treatment services,» said trade groups representing the rail industry. water in a statement. letter to the White House this month. “This would present a significant threat to human health and the health of the environment.”

Even the threat of a strike risks disrupting deliveries. Because chlorine is a hazardous material, the companies have said they will start cutting shipments as soon as a week before a possible strike to ensure no chemicals are left on the railways when operations shut down. In September, when there was another threat of a rail strike, there was a strong let men chemical shipments the week before.

food supply

About 25% of grain in the US is transported by rail, and food producers ship 1.2 billion railcars a year of grain products, including flour, soybean oil, grits, distiller’s grains and ethanol, according to the National Association of Grains and Feed.

Not being able to move such products would cause a drop in US food exports as countries become increasingly dependent on US food supplies after the disruption of exports from Ukraine.

A railroad hopper car ready to transport corn at the Kokomo Grain Co. Inc. transshipment facility.
A railroad hopper car ready to transport corn at the Kokomo Grain Co. Inc. transshipment facility in Edinburgh, Indiana, on March 22.Luke Sharrett/Bloomberg via Getty Images file

It would also limit the ability of ranchers to feed their cattle, and some regions rely solely on rail for their grain shipments, said Michael Seyfert, president and CEO of the National Grain and Feed Association.

“We cannot allow our exports to fall due to a railway strike, and we also have several areas of the country where cattle producers have to send their feed by rail. It’s really the only way they can get it, so we would have severe food shortages in a very quick period of time,» Seyfert said on a call with reporters.

Farmers and grain producers are trying to place supplies early to prepare for a shutdown, but are constrained by limited storage space, Seyfert said. Grain processors typically have three to 10 days of storage availability, after which they would have to halt production until the products move to ethanol mills or refineries.

A strike would also disrupt the distribution of fertilizers used on crops, since about half of the fertilizer in the country is transported by rail. Like the chlorine, the fertilizer is a hazardous material that would have to be removed from the rail system starting next week if there was a chance of a strike. For every day of the strike, it would take five to seven days for the supply chain to catch up given limited storage at production facilities, said Corey Rosenbusch, president of the Fertilizer Institute.

“If this is not resolved quickly, fertilizer manufacturing would have to be reduced,” Rosenbusch said on a call with reporters. “This would be absolutely devastating for fertilizer distribution.”

Retail sale

A strike would not have a significant impact on holiday shopping, because most retailers have already stocked their stores, warehouses and distribution centers for the holiday shopping rush.

People buy clothes at a Costco store
People shop for clothes at a Costco store in Monterey Park, California, on November 22.Frederic J. Brown/AFP via Getty Images file

But it could cause major disruptions throughout the supply chain, particularly at seaports. When cargo arrives in the US by ship, it is often offloaded onto trains that carry the containers to distribution points for trucking, the retailers said.

With the closure of the railways, the country could return to scenes like those seen last year, when container ships were lined up on the high seas, unable to reach ports to unload their goods, once again leading to empty store shelves as American manufacturers were unable to source the parts and components they needed from abroad.

“A rail strike, coupled with historically high levels of inflation, could wreak financial havoc and inflict catastrophic damage on American businesses, workers, consumers and the economy,” said Matthew Shay, director of the National Retail Federation, in a statement. a statement on Monday. «We are in the peak holiday shopping season, and it is essential that retailers and other businesses can trust these vital supply chain partners.»

Gas

A rail shutdown could push gasoline prices higher again just as oil has fallen to its lowest level since December due to the disruption it would cause in the shipment of ethanol, which is used in the vast majority of the gasoline we it is consumed in the US

“Shutting down our rail system, even for one day, would have a significant impact on the US gasoline supply and could lead to higher prices for American consumers and businesses ahead of the holiday season,” he told reporters. Mike Sommers, director of the American Petroleum Institute. Tuesday.

More than 70% of ethanol is transported by rail, and 25% of grain reaches ethanol processing plants by rail, according to the Renewable Fuels Association.

«Our country’s ethanol producers rely heavily on the railways to get their products to market, and if the country’s trains stop running, the country’s ethanol biorefineries will stop working as well,» the president of the FRG, Geoff Cooper, in a statement. «We need a resolution quickly so that the more than 400,000 jobs supported by our nation’s ethanol industry and the rural economy itself do not suffer the dire consequences of a disruption in rail service.»