Roadbed v. Canal

What happens to prices when the President's 2,000,000-ton shipping pool curtails coastwise and intercoastal shipping, adding costly rail rates to goods which now move cheaply by sea? This problem landed on the desk of OPACS Chief Leon Henderson (see p. 16) last week, and it looked as though busy Leon might have some answers ready.

In 1940 more than 7,000,000 tons of coast-to-coast freight moved via the Panama Canal. Chief west-to-east items are lumber and wood pulp, canned goods, gasoline and fuel oil. From east to west the big items are steel and manufactured goods. Rail rates are from two to four times higher than water rates. On some bulk commodities this difference could add 25% to 50% to delivered cost. Recently this margin has narrowed, for many shipping rates have increased, while the railroad rates have not.

Some price hikes probably are inevitable, but Henderson thinks many of them can be prevented. For one thing, he knows the existing freight-rate structure bears no systematic relationship to railroad costs. He also knows that more than half the increased traffic now in sight would move from south to north and from west to east--the directions in which the costly movement of empty freight cars is now heaviest. Meanwhile the railroads have been experimenting with low rates for trainload hauls. Moreover, railroad net operating income has risen sharply this year. If Henderson is to prevent price increases, he will have to get power from Congress to find some way of putting through reduced freight rates for shipments diverted from water transportation; or else he will have to make up the difference to the shippers.

Prices are not the only problem raised for Henderson by the President's shipping pool. As combination price and supply commissioner, Henderson is the New Deal official closest to the job of finding sufficient transportation for all the freight diverted from canal to roadbed. The New Deal has long regarded rail capacity as a potential bottleneck.

The diversion of lumber shipments now made through the canal, it is estimated, would add 6,000 carloads a month to the rails' burden. New York City alone "imports" some 16,000,000 cases a year of fruits and vegetables from the West Coast which now will be dumped on to the railroads--or on to overworked transcontinental trucks. Also added to west-to-east rail traffic will be imported goods from the Pacific carried by ships which formerly continued on through the canal to East Coast ports. Since ships waste 30-35 days going to the East Coast and returning to the Pacific, such cargoes now will be landed on the West Coast, sent overland by rail. Important among them are rubber (estimated to amount to 354,000 tons this year), and tin (45,000 tons) from the Far East. Furthermore, nitrates (300,000 tons) and copper (300,000 tons) from South America's West Coast may soon be landed in the South, shipped north by rail.

The individual commodity most affected by diversion of coastal and intercoastal shipping will be oil. Out of the U.S. fleet of 361 tankers, 50 will go to the shipping pool (25 at once, 25 later). This means the diversion of about 200,000 barrels a day (enough to fill 1,000 tank cars) to the railways. Shipping costs are 1.25 mills per ton mile by tanker, 3.2 mills by pipeline, 8.3 mills by rail. Pipelines cannot move all types of petroleum products, could not carry all the extra load anyway. Oilmen began worrying at once about moving next winter's fuel-oil requirements in the East.

Utilitymen angry at Government competition got a laugh last week when Government's public-powerite Harold L. Ickes quacked back that a $19,000,000 hydroelectric development by Pacific Gas & Electric was unfair competition with Government.

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