COMPETITION. There is ALWAYS some form of completion versus rail
![UP%20Logo%20(3-bit%20Color)[1]](https://railroadeconomist.com/wp-content/uploads/2015/05/UP-Logo-3-bit-Color1-500x246.gif)
There is always some form of competition. That’s a lesson many of the world’s railway leaders too often forget.
And many government planners and rail regulators sometimes never understand this concept.Now, we see an illustration of these competitive forces here in the United States.
Union Pacific railroad announced that its 2nd quarter 2015 coal traffic is down 25% versus the second quarter of 2024.
The competition?
It is SOURCE COMPETITION as natural gas lower prices are taking market share from coal.
To some extent, it is also a weather impact on the electric utility burn rate. Many regulators fail to even allow for source competition in their thinking about railway economics. I have seen them reject the concept outright in some US past rail rate cases. Many so called due diligence economic rail studies don’t realistically consider competition and the ability of competitors to over time adjust and respond to great rail initiatives.
For example, initial plans to back the financing of the Channel Tunnel failed to consider the reaction of English Channel ferry operators to compete with the new rail tunnel by building bigger ferries with much lower unit operating costs.
Today’s UP announcement reminds us to always consider the competition.
What commercial examples do you remember?
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