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November 02, 2022
Media Advisory: SIU prof can discuss supply chain risks, including diesel shortage, possible rail strike
CARBONDALE, Ill. — Gregory D. DeYong, a Southern Illinois University Carbondale associate professor of operations management, is available for interviews about new and recent risks to the already fragile supply chain, including a critical diesel fuel shortage, a potential rail strike and the drought that has hit the Midwest and other areas, affecting waterway transports. DeYong can be reached at gdeyong@business.siu.edu.
DeYong said the diesel fuel shortage has several implications as it affects trucking, barge traffic and farm equipment as well as home heating oil in some parts of the country. With short supplies, he said, when more goes toward one purpose, there is less product available for other needs, leading to higher prices for diesel and fuel oil.
“At this point, the diesel shortage is unlikely to have a big impact on farm harvests as most are done by now, but there will be higher shipping costs for truck and rail, which translates to higher consumer prices,” he said.
To put it in perspective, the country’s stockpile of diesel and other distillate fuel oils stood at just 106 million barrels on Oct. 21, the lowest it has been since the U.S. Energy Information Administration (EIA) began collecting weekly data in 1982. The distillate inventories were 26 million barrels below seasonal averages over the last 10 years, down 20%, according to the EIA report on Oct. 26. Moreover, reports indicate that the inventories as of the end of July were equal to just 30 days of consumer demand, the lowest level since monthly record-keeping began in 1945, and the most recent estimates are that just about 27 days’ supply are on hand.
On top of that, three railroad unions have already rejected a deal with the major U.S. freight railroads, increasing the likelihood of a rail strike later this month, and yet another big vote is scheduled for Saturday, Nov. 5. DeYong said there would be no strike until after the Nov. 19 deadline, at the earliest, but with each rejection vote, the odds of a strike increase.
The Brotherhood of Railroad Signalmen, the International Association of Machinists District 19 and the Brotherhood of Maintenance of Way Employees Division of the International Brotherhood of Teamsters, which represents track maintenance workers and is the third largest of the unions, have all voted against the contract. The two biggest unions, which represent conductors and engineers, will conclude their votes later this month. A strike by any one of the 12 freight rail unions would likely be honored by the others, bringing major freight railroad operations to a standstill, officials said. A freight railroad strike would cost the U.S. economy about $2 billion per day, according to the Association of American Railroads (AAR).
DeYong has personal experience as well as professional knowledge in supply chain management. Before becoming a faculty member, he worked as an import/export manager where he was responsible for about $100 million in products annually. DeYong is currently working to establish a Center for Supply Chain Management and Logistics within the College of Business and Analytics.
As harvest season is in full swing, one-third of U.S. grain exports travel by rail, so a disruption could worsen food shortages worldwide.
DeYong can also speak about other issues threatening the supply chain, including:
- The difficulties and higher expenses involved in waterway transportation as a result of drought affecting many parts of the country, including the Midwest.
“The Mississippi River is still a problem because essentially, barge traffic is one-way only. Since the water level is so low, the channel isn’t wide enough to allow an upstream tow to pass a downstream tow,” DeYong said. “That slows things dramatically. Plus, there are sporadic closures while the Army Corps of Engineers does emergency dredging. Looking at the live map of traffic this week, there isn’t much moving between Memphis and St. Louis, and what is moving is likely at reduced volume because they have to watch weights on the river, so that raises shipping costs as well. Of course, if there is no diesel fuel for the tow boats, that further complicates the situation.”
- Prolonged negotiations for a labor contract covering more than 22,000 port workers at 29 Pacific Coast sites stretching from California to Washington State, which handle about 40% of the nation’s imports. Although no work interruptions have occurred at this time, some shippers have routed cargo elsewhere as a precaution.
“I am very familiar with delays and labor disputes at that port,” DeYong said, noting that when he worked in the industry much of the product he handled came through the port at Long Beach, California.
Other issues affecting the supply chain include: diseases such as the avian flu and the war in Ukraine.