KEY POINTS
- Union Pacific collected $91.1 million more in fuel surcharges than it spent on fuel in Q2, far outpacing rivals.
- The surplus added 14 cents a share, about $83.2 million, to profit, reviving complaints that surcharges run high.
- The figures come as Union Pacific pursues an $85 billion takeover of Norfolk Southern that critics say would curb competition.
US railroad Union Pacific collected $91.1 million more in fuel surcharges than it spent on fuel in the second quarter, far outpacing its rivals, a regulatory filing showed.
The surplus lifted Union Pacific’s profit and sharpened criticism from some shippers, who argue that surcharges meant to recover higher petroleum costs from the US-Israeli war on Iran sometimes run too high, Reuters first reported.
A rare window into rail pricing
According to filings with the Surface Transportation Board, railroads are the only US transport firms that report both fuel costs and surcharge revenue, which offers rare insight into how the charges can boost profit. Moreover, the data showed that only Norfolk Southern and CSX also ran surpluses, of $3.6 million and $8.4 million, far smaller than Union Pacific’s.
Union Pacific said its year-on-year surcharge increase matched the industry, and that surcharges form part of the overall price it negotiates with customers. Still, the company disclosed last month that the charges added 14 cents a share to second-quarter earnings, which works out to about $83.2 million in profit. In the first half overall, its surcharge revenue ran $56.4 million above fuel costs, even though the first quarter alone showed a $34.8 million shortfall.
Surcharges and a merger under fire
Furthermore, the figures land as Union Pacific seeks approval for an $85 billion takeover of Norfolk Southern that would create the first railroad spanning the continental United States. The company said the deal would give it 36 percent of the market by carloads, but the Stop the Rail Merger Coalition put the combined share at 50 percent and warned it would cut competition and raise shipping costs. Rival BNSF told regulators the merged group could apply Union Pacific’s high-price strategies nationwide.
Meanwhile, industry critics flagged the wider trend. Ship.com executive Kyle Henzel said rail fuel surcharges had risen 43 cents a mile since March, above the previous record set in September 2008. Consequently, scrutiny of the charges is likely to grow, even though surcharges have survived legal and regulatory challenges for decades.
