The Expert Podcast

# Rails to Ruin: How Railroad Shutdowns Are Choking America's Diesel Supply Chain

Something is going on with diesel fuel and DEF fluid that might not be entirely visible or very conspicuous but it could have a very serious effect on trucking and prices and even construction so what is it well without going into details let's talk about Union Pacific which is a railroad company and Pilot which is the truck stop network across the country basically what happened is Union Pacific railroad told Pilot and they also owned Flying J which is the other big truck stop network to cut back on their deliveries of fuel and DEF diesel exhaust fluid by 20 to 30 percent.

The CEO of Pilot said that we were required by Union Pacific to reduce shipments by 26 and he's testifying at that and this was the first one um what's worse the company was told to cut shipments back even more to 50 percent it's not just diesel fuel it's the DEF diesel exhaust fluid so the question is why is this happening and what's going to be the result well if you are a railroad company and you're tight on your capacity you want to cut back so that you can have freight going for other customers well who are you going to cut back on well the trucking industry is kind of a competitor to the railroads so if you can cut back on something that will also hurt your competitor wouldn't that be a good first choice.

Is that why they're doing it who knows it's all conjecture at this point speculation but it does seem kind of fishy that the one thing that the railroad company is cutting back on is diesel fuel and diesel exhaust fluid for trucking companies which is a competitor maybe they're cutting back elsewhere too but this is what we've heard about and how much does that cut back well according to the math a single rail car holds enough DEF diesel fluid for 3,000 trucks and if you do the math on how much that fills up a truck that's five million road miles affected from one car load one railroad car load.

Now diesel exhaust fluid as you may or may not know is required on all 2010 trucks on the road it helps cut down emissions on these trucks in fact in California you can't even register a 2010 or older truck so if you have a truck that's 12 years old or newer and that's pretty old you have to use DEF and almost all trucks on the road do this but if you're a trucker and you're having trouble getting diesel fuel or the price goes up or you're not able to get DEF fluid you can't drive in fact most of the trucks from 2010 and newer if you run out of DEF in your system the truck won't even start won't even run so technically the engine can operate with just diesel fuel but there's a computer in these trucks that shuts them off if there's no DEF.

If you're a trucker a builder somebody relies on diesel fuel let us know in the comments what you think about this have you heard of this before have you heard of this embargo on diesel fuel and DEF much of the diesel fuel and DEF is shipped by rail in fact some parts of the country there are no pipelines for diesel fuel some parts of the southwest some parts of even the pacific northwest don't have pipelines to get diesel fuel so the only way that it gets to the truck stops or the fueling stations is by rail to get into the area and then the tanker trucks pick them up at the terminal and bring them the last mile DEF there are no pipelines for DEF a lot of it's manufactured on site but that also needs the chemicals in the rail cars.

So what's going on with this what are your thoughts is there something nefarious going on is it just random the railroad position on this is that they need more capacity well here's the other thing if railroads are cutting capacity on diesel fuel and DEF they're probably cutting on other items too which means that you need more trucks on the road to catch 22. If your railroad capacity is at the limit and you can't ship anymore then more freight will need to go by truck over the road those trucks need diesel it needs DEF so what's going to happen with all this freight how is it going to get from a to b can't ship it by drones even RVers are now starting to talk about having problems getting diesel fuel in some places.

Maybe it's all a big push to try to get to electric vehicles but that's not going very well either take a look this company is a startup that was going to make EV trucks for commercial use they're going to run out of money they're out of business within a month Electric Last Mile Solutions warned Friday may run out of cash one month sooner than they thought because of higher cost this is going to be a company that makes trucks for commercial use that are electric EV plug-in trucks yeah they're looking to actively pursue more money but they haven't filed a 10K and they haven't filed quarterly 10 queues and they have to redo or restate their last two quarters so they're they're toast allegedly this company.

So how's this freight gonna get around if we think that inflation and supply chain and availability of products is bad now what's going to happen when 30 to 50 of diesel fuel is not available by rail diesel exhaust fluid which is required to keep these trucks on the road is not available and the electric vehicle truck company manufacturers are going out of business will this make inflation get better or worse will this make supply chain get better or worse rhetorical questions we know the answer.

Are you seeing this at all in your business if you're a builder contractor are you seeing any of the effects of this if you are an operator of a diesel vehicle what are you seeing at the supply facilities Flying J Transamerica Pilot even the local diesel station put your comments below let us know what you're seeing out in the field across the country let us know where you're at is places where there's pipelines that might be able to replace this the northeast even the midwest have some pipelines for diesel but not DEF and is this affecting your shipping quotes and if you're a shipper or freight receiver are you seeing higher prices for the shipping component of your materials and how is that working into your final delivered price your your output price are any of these products needed for your manufacturing diesel fuel for example and is that creating a problem.

More importantly what are other creative thoughts on the reason for this railroad company embargo on shipping of diesel fuel and DEF do you think that there's a valid reason for this is there some other logical purpose for telling one of your biggest clients that you have to cut back 30 to 50 percent basically cut their deliveries in half for a product that is their lifeblood ironically coincidentally that's also a competitor to you as a both a vendor and a competitor what do you think tell us below.