How many businesses face supply chain disruptions due to delayed rail shipments? How many industries miss growth opportunities because of insufficient rail capacity? America's freight rail system, a critical economic artery, has become mired in deteriorating service quality and inadequate capacity.
At the recent RailTrends conference, Martin Oberman, chairman of the Surface Transportation Board (STB), delivered a scathing assessment of the current state of U.S. freight rail. His remarks exposed systemic failures in an industry that moves nearly 30% of the nation's freight by volume.
A Chairman's Indictment: Service "Collapse" and Workforce Reductions
Oberman's address served as a damning diagnosis of America's rail infrastructure. He described 2022 as "a challenging year" for regulators, citing both the complex merger between Canadian Pacific and Kansas City Southern and what he called a "service collapse" among Class I railroads.
The chairman specifically named Union Pacific, BNSF, CSX, and Norfolk Southern as the worst offenders. He emphasized rail's vital economic role, noting that when railroads underperform, the entire economy suffers. Oberman referenced an Association of American Railroads (AAR) report showing railroads transport 40% of U.S. freight tonnage and generate $219 billion in annual economic activity.
"The STB exists to regulate railroads that effectively operate as monopolies or duopolies," Oberman stated. "Without oversight, these companies prioritize profits over public service."
The chairman challenged railroads' pandemic-era workforce reductions, calling their 10% staff cuts since March 2020 a "partial shutdown" with significant economic consequences. Data shows Class I railroads eliminated 29,000 positions (18% of their workforce) between January 2016 and February 2020—before the pandemic began.
Operational Failures: Delays and Embargoes
Oberman detailed specific service breakdowns:
• Train delays due to crew or power shortages reached record levels
• Embargoes (service suspensions) increased from 140 in 2017 to 1,115 through September 2022
• Over 80% of embargoes resulted from congestion—a euphemism for staffing shortages
"When trains can't move because railroads haven't hired enough crews, how is that different from a lockout or strike?" Oberman asked.
The chairman criticized railroads for turning embargoes—once reserved for natural disasters—into routine operational tools. These sudden service suspensions, often issued with minimal notice, disrupt supply chains and undermine business planning.
The Economic Toll: $109 Billion in Lost Output
Oberman quantified the economic damage:
• Rail output fell 12.9% below trend in 2021 and 15% in 2022
• Using AAR's estimate that a full rail shutdown costs $2 billion daily, Oberman calculated the "partial shutdown" cost $3 billion per day in lost economic activity
• Total 2022 losses reached $109 billion; 2021 losses totaled $88 billion
Corporate Priorities: Shareholders Over Service
The chairman contrasted railroads' austerity measures with their shareholder returns:
• $48 billion saved through workforce reductions since 2020
• $600 billion returned to shareholders via stock buybacks and dividends during the same period—12 times labor savings
"Could shareholders have accepted $550 billion in returns instead of $600 billion to maintain service standards?" Oberman asked pointedly.
Systemic Problems: Efficiency, Strategy, Investment
Analysis reveals three core issues:
1.
Chronic Understaffing:
Workforce cuts left railroads unable to handle demand surges
2.
Short-Term Thinking:
Prioritizing quarterly profits over long-term infrastructure investment
3.
Regulatory Gaps:
Insufficient oversight of monopoly service providers
Path Forward: Oversight, Modernization, Workforce
Experts suggest solutions including:
•
Stronger STB oversight
of service standards and embargo practices
•
Workforce reinvestment
to rebuild operational capacity
•
Technology adoption
including predictive analytics and automation
•
Infrastructure upgrades
to address aging rail networks
As Oberman concluded: "Railroads must choose whether to be growth engines or extraction machines. The economic health of the nation depends on their answer."