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- March 3, 2011 -

 
     
 

Supply Chain Graphic of the Week: Are Shippers Getting Subsidy from US Citizens on "Social Costs" of Transportation

New GAO Reports Says Yes, Singles out Trucking as Prime "Freeloader"; Here come Higher Diesel Prices?

 
     
 

By SCDigest Editorial Staff

 
 

 

Well, here we go - maybe. Just a few weeks ago, SCDigest editor Dan Gilmore wrote a column asking if the Transportation Tsunami [is] Coming Again? It was actually focused primarily on the trucking sector (energy costs, capacity, hours of service, CSA 2010, etc.), and partly reflected the thoughts of some in the freight industry who see  a "war on trucking" emerging.

Well, those who think that way may have another thing to worry about.

This week, the Government Accounting Office (GAO) presented a report to Congress that in summary said various transportation modes, especially the trucking sector, were getting a "free ride' from citizens and tax payers because the social costs of those frieght movements were not reflected in the costs to move the goods.

The report is titled A Comparison of the Costs of Road, Rail, and Waterways Freight Shipments That Are Not Passed on to Consumers, but what they really mean is that these costs are not passed on directly to shippers and carriers, which would then indirectly passed them on on to consumers and businesses in the cost of what they purchase from shippers.

We will have a full review of this report shortly, but for example the report notes that "GAO estimates that freight trucking costs that were not passed on to consumers were at least 6 times greater than rail costs and at least 9 times greater than waterways costs per million ton miles of freight transport. Most of these costs were external costs imposed on society."

Below is a chart taken from the report, illustrating where the GAO sees "social costs" that are not borne by shippers and carriers.

 

 

Source: GAO Report

 

From our view, there is an element of truth to this, just as gas taxes currently do not cover the full costs of automobile travel.

Whether those costs should be fully paid for by the users (in this case shippers/carriers) and defining what the social costs really are (especially for environmental type issues) are the really hard questions.

But this seems clear to us as a first savlo towards raising the costs to ship product, especially via truck, and likely through higher diesel fuel taxes.

Look for a complete summary of this report on the SCDigest home page soon, or in next week's On-Target newsletter.

 

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