Back on April 26 and 27, the Surface Transportation Board (STB) had a hearing on “Urgent Issues in Freight Rail Services” and what some would consider an arm-twist was put into the official record.
Pilot CEO Shameek Konar, the fourth person to hold the position, made a statement that is making rounds at the truck driver level. And I quote, “We were required by the Union Pacific to reduce shipments by 26%.” Yeah, you heard correctly, it’s at the 02:45 mark of the transcript.
One of the “Big 3” in truck stops (Pilot/Flying J, TA/Petro, and Love’s), was told to cut back shipments? And what’s worse, the company was told to cut shipments back even more to 50%.
It’s not just diesel fuel that’s affected. Diesel exhaust fluid (DEF) is also hauled by rail (about 21,500 gallons per carload). You can do the math on how much money each could be worth. Pilot sells about one-third of the DEF and over 20% of the diesel fuel for over-the-road trucks.
Now who would want fuel prices to stay high?
When someone tells a major player to cut a portion of their supply chain back by this amount, it can cause spot shortages like we saw in Arizona last November. A single railcar holds enough DEF for over 3,000 trucks, using Pilot’s testimony of an average refill of 7 gallons. That’s about five million road miles affected, just from one carload. All truck motors built post-2010 must have a DEF system installed. And let me tell you, running out of DEF is far worse than running out of diesel.
So what did Pilot do when it was told to cut rail shipments on Union Pacific’s system? Well, when the guy who holds about one-third of your stock also owns a railroad, it’s not too hard to figure that out. Warren Buffett, the “Oracle of Omaha” himself, has a 38.6% stake in Pilot Company, with plans to buy more in 2023. He also owns Burlington North Santa Fe Railroad (BNSF) which he bought in February 2010. So making a call to haul more of the fuel you own in-house could be seen as a no-brainer.
So why did Union Pacific start this little tirade? Who knows? I do own one share of Reynolds Consumer Products , but I prefer not to use Reynolds Wrap any more making tinfoil hats. Some say that the investors who hold big chunks of Union Pacific stock want to push their electric vehicle programs. You can look into this yourself. My days of fighting “super-villains” are behind me.