When the prices of gas go down, it has ranging effects on the economy of a nation. All countries across the world charge different prices of gas, and this depends on where they import their oil from or where they extract it. Also, some factors which may affect the pricing include distances covered during importation, the amount of gas imported, and the economy of the country importing the gas. As prices of gas decrease, the economy improves since the prices of most basic commodities go down. Consequently, the transport industries for instance rail, trucking, and shipping will benefit since they will use less money on fuel. A good explanation for a decrease in the price of gas is because there may be the production of a surplus of gas (Mattson, 2012).
Rail
According to Mattson (2012), the railway cargo industry witnesses a positive outcome from the reduction of the prices of gas. As such the industry makes huge profits within a short period of its operation. Gas is not a big contributor to the overall costs of running railway activities as it is in the airline industry. However, it has led to about twenty percent of the overall costs of operating a railway industry. Also, gas makes an essential part of running the rail companies. On the other hand, the railroad industry benefits much more from the decrease in gas prices. The sharing of the benefits from reduced prices of fuel in the railroad industry is equal between those who operate the industry and their clients (Mattson, 2012) . On the same note, the operators enjoy bigger margins of profit while the customers experience low prices of transport when moving their goods or when traveling. An example of a railroad company is the CSX. It charges gas surcharges on a basis of a two-month interval. As such, it decreased its fee to $0.36 in one mile from $0.42 in one mile that is a decrease of $0.06 translating to a decline of fourteen percent (Thompson, 2010) .
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Moreover, those who invest in the rail operations must also take in the challenges of competition which results from the decrease in the prices of gas. In general, when the distances to be covered are long many individuals prefer using a train and not trucks. Although trucks are faster, they charge higher prices compared to train which charges less fare even if the distances are long. As such people will always love to pay less and travel long as this help them to save part of their money. The Department of Transportation in the United States indicated that as the prices of gas go down, the railway industry loses few of its cost benefit. It is because customers look into reliability, price, convenience, and speed amongst other factors which may affect their movement (Thompson, 2010) .
As a result, when the trucking industry reduces their prices with a big margin than rail industry then the customers may rebalance the equation speed versus cost and use trucking but not rail. As such, the operators in the railway industry must do what their customers prefer to retain them or else they will use other transport modes. Some of the things that the rail operators need to implement are; improving the reliability of the rail industry, improving the speed, and optimize arrangements and operations of the industry. On the issue of speed, the operators should embrace the modern technology where high-speed trains can move as fast as tracks.
Also, the rail operators need to consider and monitor issues that deal with capacity, which affects other modes of transport, for example, a decline in the hours of operation and shortages of drivers. Despite the fact that the cost of gas goes down, the rates of freights are high because there is a scarcity of drivers for example; in 2014, the total number of freight drivers in America were thirty-five thousand. The American Trucking Associations group predicts that this shortage of drivers could rise to not less than two hundred thousand drivers by 2020. As a result, rail will persist to be viable on a comparative price basis since the shortages in trucking will continue despite the decline in gas prices.
If the prices of gas continue to be low for a prolonged period, the rail operators need to think about changes in the intermodal gateway. Consequently, they need to consider promising shifts in routing to ensure they meet the changes. For instance, cargo from Asia which is meant for New England can be first moved to an intermodal gate within the mid-Atlantic. Although if the decrease in the prices of gas makes inland transport much cheaper, then shippers can prefer to employ different gateways, for example, the West Coast or the Gulf of Mexico.
It is as well important for the operators of rail business to monitor the consequences of prices of gas on the demand for shipping gas-related product and crude oil. As a result, the general price of exploring shale is approximated to be between seventy dollars to eighty dollars for every barrel. On the other hand, if there are any prices below this price for a long period can lead to the drying up of gas drills in North America. As a result, it will weaken the demand for transportation modes which use gas.
The Department of Transportation in the U.S explains that the shipping of gas-related products and crude oil, for example, frac sand, signifies about five percent of cargo amount that is presently there for major United States rail transporters. Due to that, the rail industries should strive to rise using alternative cargo sector. Also, they should focus on the alternatives that positively relate to the decrease in the price of gas which is not expensive to operate. For instance, when the price of automotive gas goes down it leads to more flexible spending, and so the rail operators need to make use of an increase in the transportation of clients’ products.
Also, operators who deal with passengers’ rail must think about the consequences of the decline in the prices of gas for both short and long distances. As short distances refer to commuter travel, long distances refer to interstate trips. To be specific, when the prices of gas fall, the corresponding rate of driving go down, and this can make some individuals to stop using public means of transport and start using private cars. When compared, private mode of transport is reliable, convenient, and quicker than a public mode of transport. If many people use private mode of transport, it would mean that the revenues collected by the state and municipal authorities rise because they sell tickets for cars to park (Mattson, 2012).
The public operators for instance state and municipal authorities would require to elevate subsidies per every passenger, increase the fares for tickets, or discover other sources of revenue to compensate the decrease in ridership. Between the years 2011 to 2012, research was conducted by the (APTA) American Public Transportation Association and approximated that the prices of gasoline of four dollars for every gallon leads to six hundred and seventy million extra public transport travels every year. On the other hand, a price of five dollars for every gallon leads to a rise of this amount to 1.5 billion. The decrease in the prices of gas, one can observe that there is a backward trend, as people move back onto the roads. However, when the highways are congested people are frustrated, and they will start using the railway to travel. Also, some individuals are sensitive to the environment and will stick to railways their preferred mode of transportation.
Trucking
When gas prices go down, the trucking industry has a high potential of benefiting in both the long term and short term. Normally the tractor-trailer consumes one gallon for approximately six to eight miles it covers. According to the United States Department of Transportation, if a gas price is about sixty dollars to eighty dollars per barrel, the line-haul charge for every container distance is $1.82 in trucks while in rail it is $0.37. However, when the prices of gas are low, the comparative gap in prices narrows (Smith, Garshick, & Speizer, 1998) .
In the short period, trucking industry operators have chances of gaining greater margins as they pass few of the savings to their clients. An example is the National Delivery Systems, which charges a fuel rate on clients that is informed every week to indicate modifications in the average state index of the gas. Also, as previously indicated when the costs of fuel fall it allows trucking industry to be more viable when compared to the rail industry. As such the truck industry always strives to bring back their clients which they may have lost when the prices of gas were higher. They may find extra customers who prefer to travel fast at their low prices when the prices of gas are low (Smith, Garshick, & Speizer, 1998) .
In a survey conducted on a set of United States shippers in at the end of 2014, it was noted that these shippers always transfer cargo to trucks from intermodal trains. They did some of the transfer because sometimes the rails are congested. The congestion at rails is due to surge traffic which in turn wastes a lot of time. Companies that deal with trucking should find ways of exploring this trend further by noting the stronger cost and speed trade reliefs which are present for clients (Mattson, 2012).
Also, low prices of gas make the trucking industries to concentrate on only profitable activities which have high need, rather than saving fuel. As such, these industries can change their ways of operation like amending routes and business networks. In so doing, they can offer good services to their clients with convenience, reliability, and speed. Lastly, when the prices of gas are low, truck companies can maintain the usage of their old trucks because of low fuel consumption rates. Such old trucks are as well efficient to use as so long as they meet the required standards of emission, and cannot pollute the environment (Mattson, 2012) .
Ocean Shipping
Just like any other transportation modes, gas forms the core of operating a shipping industry. Like trucking companies, ocean shipping industry has chances of getting good profits when the prices of gas fall. It is because a low operational costs lead to higher margins of profits. In the lasting period, low rates of fuel may lead to the expansion of a wide range of fleet vessels. In the shipping industry, higher rates of burning fuel for every pound of freight is related to the age of the vessel, the size of the vessel, and the speed of the vessel. After the spike of oil in 2008, there was an important focus on lowering the costs of gas using new vessels which are efficient, reducing the speed of vessels, and merging into bigger ships to pay back the lost amount of fuel (Hecker, 2002).
As Hecker (2002) says, the shipping industry is the largest cargo transportation system in the word. As such many goods that are imported or exported through the ocean contribute to the development of the nation for instance taxes imposed on imports by the tax authorities can be used to develop another department in the country. The cargo ships use a lot of fuel for their streaming, and as the gas prices fall, their operations rise and vice versa. Consequently, these ships offer a number of employment opportunities especially when their operations are not interfered because gas prices are low, and they work continuously.
Hecker (2002) believes that if low prices of gas persist for a long period, shipping operators can make a profit by offering their services through a variety of ways. For instance, they can use small ships on distinct routes that initially did not need shipping operations due to high costs of gas (Hecker, 2002) . Also, shipping companies can save by avoiding the buying of new vessels and maintain the conditions of the older vessels which consume less fuel. A fall in the cost of gas creates chances for investing in passenger's vessels. As such those who operate cruise and ferries enjoy their operation since they can carry many passengers and use less fuel. It enables them to make profits in the long run (JA, CHO, & PAK, 2012).
The movements in the gas market are rapid, big, and gentle. In shorter periods, the decrease in the prices of gas will make it possible to get profits, especially in transport industries. Conversely, there are uncertainties whether these prices will remain low and for how long (Radchenko, & Shapiro, 2011). For certainty, if Saudi Arabia, chief oil producer, maintains a price of twenty dollars for every barrel, then the issue of low prices of gas would last for a long period. As such the transportation industries will have a wide range of opportunities to exploit in the transport sector. A scenario where prices of gas go up, it would be the reverse of the positive outcome of low prices of gas (Radchenko, & Shapiro, 2011).
In summary, when gas prices rise cautious industries evade any operation that may waste fuel and sought for ways of conserving it. On the other hand, the same companies will embrace low prices of gas and expand their profit margins through maximum operations. The transport sector benefits many forms the fall of gas prices. As such, they hedge in situations of higher prices and maximize the opportunity of low gas prices. When gas prices decrease the level of revenue collected from the oil industries goes down. Also, the companies that offer transportation services to industries that trade in gas and oil will make less profit because they will be paid less money to transport these products. Decrease in the prices of gas lead to the rise of the economy since everyone can save from low fares during traveling, low food prices, decrease in prices of clothes amongst others.
References
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Hecker, J. (2002). Marine transportation . [Washington, D.C.]: U.S. General Accounting Office.
JA, A., CHO, S., & PAK, M. (2012). Fuel Consumption within Cargo Operations at the Port Industry A simulation Analysis on the Case of S Port Company in the UK. The Asian Journal Of Shipping And Logistics , 28 (2), 227-254.
Mattson, J. (2012). The Effects of Gasoline Prices on Bus Ridership for Different Types of Transit Systems. Journal Of The Transportation Research Forum , 47 (3), 89-96
Radchenko, S., & Shapiro, D. (2011). Anticipated and unanticipated effects of crude oil prices and gasoline inventory changes on gasoline prices. Energy Economics , 33 (5), 758-769.
Smith, T., Garshick, E., & Speizer, F. (1998). Assessing Historical Diesel Exhaust Exposure For A Trucking Industry Study. Epidemiology , 9 (Supplement), S57: 7-56 http://dx.doi.org/10.1097/00001648-199807001-00145
Thompson, S. (2010). Competition in the Railway Industry. Journal Of The Transportation Research Forum , 46 (2), 34-67.
