Norfolk Southern believes rising fuel prices could reshape freight flows in the United States, potentially benefiting rail at the expense of trucking.
Speaking at the J.P. Morgan Industrials Conference, CEO Mark George said that elevated fuel costs — driven in part by tensions around the Strait of Hormuz — are putting pressure on trucking rates, which could push shippers toward intermodal rail solutions.
According to George, sustained increases in diesel prices could accelerate a shift already underway in the market. Higher trucking costs may reduce capacity, particularly among smaller operators unable to absorb fuel price spikes. “Pressure on trucking is a pretty good thing for us,” he noted, suggesting rail could gain market share as a result.
The company also sees indirect benefits through its coal and utility-related business. George explained that higher gas prices tend to drive increased coal consumption by utilities, supporting volumes in Norfolk Southern’s energy segment.
However, the outlook is not without challenges. The railroad itself is heavily exposed to fuel costs, consuming approximately one million gallons of diesel per day — or around 30 million gallons per month. A $1 increase in fuel prices would represent a $30 million financial impact, while even a 50-cent rise would translate into a $15 million quarterly headwind.
To offset these pressures, Norfolk Southern plans to introduce fuel surcharges. CFO Jason Zampi said these will be gradually implemented, with full impact expected in the third quarter. However, there is a delay in cost recovery, particularly in intermodal operations where adjustments can take weeks, and in industrial segments where the lag may extend to several months.
As of March 23, US diesel prices reached approximately $5.38 per gallon, up from $5.07 the previous week, according to Energy Information Administration data — underlining the scale of cost pressure across the transport sector.
