Rail Dispute Could Trigger An Energy Shortage In The Northeast

A dispute between railways and trade unions could result in an energy shortage in the Northeast if things progress to industrial action.

Per a Reuters report citing unnamed sources, trains transporting crude oil and ethanol for Northeastern states were stopped in anticipation of a railway shutdown that could cost the U.S. economy some $2 billion.

The Northeast is a major energy consumer that needs additional supplies via railway besides what it receives in the way of fuel by pipelines from the Gulf of Mexico. It is already short on middle distillates, including heating oil, as is the whole country, with the situation particularly serious in New England. Distillate stocks there are at the lowest level since record began in 1990, according to the Energy Information Administration.

With the looming strike among railway workers, the likelihood of boosting these stocks is on the decline as some fuel producers begin to suspend shipments of hazardous materials, including fuel blending components. What’s more, some producers are beginning to wind down their operations in anticipation of the next stage of the dispute.

The wage negotiations between railways and trade unions began two years ago but recently hit a wall and the risk of industrial action that would paralyze the U.S. transport system spiked.

The shutdown could begin this week, on Friday, freezing almost a third of cargo shipments in the United States and aggravating an already severe inflation situation.

"The parties continue to negotiate, and last night Secretary Walsh again engaged to push the parties to reach a resolution that averts any shutdown of our rail system," a spokesperson for the Labor Department said earlier this week, as quoted by Reuters.

"All parties need to stay at the table, bargain in good faith to resolve outstanding issues, and come to an agreement," they added.

By Charles Kennedy for Oilprice.com

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