Canadian Pacific Rail plans three per cent hike

greenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Canadian Pacific Rail plans three per cent hike to cover rising fuel costs JUDY MONCHUK

BANFF, Alta. (CP) - Canadian Pacific Railway is looking to raise freight rates because of soaring energy prices. "We're very seriously considering further increases in the three to five per cent range," said Hugh MacDiarmid, executive vice-president of the Calgary-based railway.

As crude oil prices have skyrocketed in the past year, fuel has gone from 10 per cent of CP Rail's operating costs to between 13 and 14 per cent. That has amounted to more than $100 million in increased costs, MacDiarmid said. "When you look at $35 or $40 (US) a barrel oil we have to do something."

There's no date set for the increases, although any contracts being renewed will have the fuel surcharge built in. CP Rail imposed a surcharge in the spring to compensate for higher fuel costs when oil was $25 US a barrel.

West Texas Intermediate, the benchmark for crude oil, closed Friday at $32.73 US down from a high of almost $38 earlier in the week. MacDiarmid said CP Rail must react.

"We're paying it, too," he said. "A lot of our local pick up and delivery services involve trucking contractors, and a lot of those contractors are putting through 30 and 40 per cent fee increases to us which we have to pay."

Earlier this month, U.S.-based Union Pacific Railroad cited rising fuel costs when it announced a three per cent hike for hauling materials beginning in October.

Montreal-based Canadian National, Canada's largest railway, said at that time it was not looking at fuel increases but that could change with rising energy prices. A company spokesman said CN had managed to keep operating cost increases to less than one per cent despite surging fuel costs.

MacDiarmid said both Canadian National and Canadian Pacific have been running longer, heavier types of trains and getting train crews to operate more fuel efficiently and offset the increased cost.

Customer reaction to the proposed rate hike has been mixed, said MacDiarmid.

"When oil was $20, $22, $24 (US a barrel), people were resistant to the fact that we have to do something," he said.

"When it's $37, it's a little harder to argue that I shouldn't be doing something to adjust my rates to reflect that increased cost of doing business. We can only offset some of it, not all of it."

MacDiarmid said recent layoffs announced by CP Rail were not linked to fuel prices, but to the introduction of new locomotives and freight cars which require lower maintenance.

"We're asking our organization to deliver better productivity with the same workforce," he said.

http://www.southam.com/montrealgazette/cgi/newsnow.pl?file=/cpfs/business/000924/b092407.html

-- Martin Thompson (mthom1927@aol.com), September 24, 2000


Moderation questions? read the FAQ