The Impact of Rising Gas Prices on AMTRAK Fares

[Eric in East County]

At what point to you suppose AMTRAK will announce that an increase in fares in necessary because of the higher cost of fuel?

 

[Exvalley]

Does Amtrak do any hedging of fuel costs?

 

[Just-Thinking-51]

Does Amtrak do any hedging of fuel costs?

It’s called gambling not hedging.
At one point they did.
The price of crude and the price of fuel are not equivalent, so it’s a hedge fund profiteering issues. Not a real supply issue.

 

[neroden]

Never. The cost of diesel is such a small part of Amtrak costs that it isn't affected by anything other than HUGE changes in oil prices. If oil prices doubled, or were cut in half, it might have an effect. But that's not happening right now.

Higher gas costs could lead more people to try taking the train instead, which would mean higher demand for Amtrak, and that would cause Amtrak to raise prices.

 

[Willbridge]

Never. The cost of diesel is such a small part of Amtrak costs that it isn't affected by anything other than HUGE changes in oil prices. If oil prices doubled, or were cut in half, it might have an effect. But that's not happening right now.

Higher gas costs could lead more people to try taking the train instead, which would mean higher demand for Amtrak, and that would cause Amtrak to raise prices.

For some info on the seat supply / demand side, I started a thread:
Fun with revenue optimization | Amtrak Unlimited Discussion Forum (amtraktrains.com)

I was in the bus and tour businesses in the 1972-75 energy crisis and the only thing that affected regulated prices was not having any fuel. In subsequent supply squeezes fuel was available at higher prices and the only noticeable effects on customers' prices were in air travel. Motorists achieved savings by using their household's smaller vehicles or trip chaining or public transit or cycling.

The underlying problem is that customers consider whatever was the cheapest price in the previous several years to be "normal" and the higher prices to be outrageous. A price squeeze has to go on for a while before behavior changes and then the oil producers lower their prices to destroy the alternative efficiencies.

At RTD in Colorado we have a long highway coach route on US285 between Pine Junction and Denver. Over the years it proved to be a bellwether on the effects of fuel prices, responding to price increases before the rest of the system, but not until the prices had been in effect for a while.

In the past two budget cutbacks its ridership had dropped even before the pandemic but in tune with decreases in oil prices. Consequently, almost none of its service is left, so if oil prices don't drop it'll be back to coming down the mountain highway with standing loads again.

 

[BlackDiamond]

It is interesting how people react so much to the price of gas when it isn't even the biggest cost of running a car. That would be the depreciation of its initial cost. If you buy a car for $25k drive it 100,000 miles then sell for 5k you have spent $20k to drive 100k miles or 20 cents a mile. If gas is $3 a gallon and you get 30 miles per gallon that is 10 cents a mile, and most cars do better than 30mpg nowadays. Going from $3 to $4 increases the cost from 10 cents to 13 cents in this example still not a big change in the overall cost, as we haven't even talked about maintenance and insurance which are not insignificant. I tend to use the round number of 50 cents a mile for using my car, at which point a train ticket starts to look pretty good.

 

[Exvalley]

It is interesting how people react so much to the price of gas when it isn't even the biggest cost of running a car.

This is because the price of a the car is a set price and it doesn't fluctuate during the ownership of your car. If your payment is $500 per month, it isn't going to be $520 next month.

 

[tgstubbs1]

It is interesting how people react so much to the price of gas when it isn't even the biggest cost of running a car. That would be the depreciation of its initial cost. If you buy a car for $25k drive it 100,000 miles then sell for 5k you have spent $20k to drive 100k miles or 20 cents a mile. If gas is $3 a gallon and you get 30 miles per gallon that is 10 cents a mile, and most cars do better than 30mpg nowadays. Going from $3 to $4 increases the cost from 10 cents to 13 cents in this example still not a big change in the overall cost, as we haven't even talked about maintenance and insurance which are not insignificant. I tend to use the round number of 50 cents a mile for using my car, at which point a train ticket starts to look pretty good.

Good points. I would guees most people look at gas as the biggest incremental cost, while the car and insurance payments are fixed.

Many cars get better than 30mpg, but many people drive trucks, minivans and SUVs.
Ford and GM have almost stopped making cars.

 

[sttom]

It is interesting how people react so much to the price of gas when it isn't even the biggest cost of running a car. That would be the depreciation of its initial cost. If you buy a car for $25k drive it 100,000 miles then sell for 5k you have spent $20k to drive 100k miles or 20 cents a mile. If gas is $3 a gallon and you get 30 miles per gallon that is 10 cents a mile, and most cars do better than 30mpg nowadays. Going from $3 to $4 increases the cost from 10 cents to 13 cents in this example still not a big change in the overall cost, as we haven't even talked about maintenance and insurance which are not insignificant. I tend to use the round number of 50 cents a mile for using my car, at which point a train ticket starts to look pretty good.

The reasons why people don't care about depreciation can be attirbuted to the cost of the car being a sunk cost and people are not thinking of cars as investments. I never understood the mentality of a car as an investment. In the US, 90% of the population needs a car to function since our public transit ranges from next to useless to inconvenient outside of major cities like New York and San Francisco proper. For most people, gas and insurance are going to be the make or break costs for a car. It's would be like someone caring about depreciation on an appliance over the cost of electricity or natural gas.

The other issues with long term shifts is that the prices need to be high for more than a few months for people to really consider changing anything. Which brings up a thought that occured to me. My parents grew up during the energy crisis in the 70s and the psychosis of always turning things off and basically never running the heat or air conditioning was a mentality me and most of my cousins grew up with. I'm a little surprised that there wasn't a shift back towards streetcar suburb style development following the crisis than there was. I'd think that the people my parents age would have wanted a more walkable or transit orientated place to live after living through gas lines and be against using a clothes drier. An appliance that a few of my cousins refuse to buy to this day.

 

[Willbridge]

The reasons why people don't care about depreciation can be attirbuted to the cost of the car being a sunk cost and people are not thinking of cars as investments. I never understood the mentality of a car as an investment. In the US, 90% of the population needs a car to function since our public transit ranges from next to useless to inconvenient outside of major cities like New York and San Francisco proper. For most people, gas and insurance are going to be the make or break costs for a car. It's would be like someone caring about depreciation on an appliance over the cost of electricity or natural gas.

The other issues with long term shifts is that the prices need to be high for more than a few months for people to really consider changing anything. Which brings up a thought that occured to me. My parents grew up during the energy crisis in the 70s and the psychosis of always turning things off and basically never running the heat or air conditioning was a mentality me and most of my cousins grew up with. I'm a little surprised that there wasn't a shift back towards streetcar suburb style development following the crisis than there was. I'd think that the people my parents age would have wanted a more walkable or transit orientated place to live after living through gas lines and be against using a clothes drier. An appliance that a few of my cousins refuse to buy to this day.

In working with transit marketing projects it usually came out that out-of-pocket costs (gas, minor maintenance, parking) are watched closely while depreciation and insurance and registration fees are rarely a factor.

In 1982 during the start of the energy crash in Alberta we ran a really effective campaign that showed what people could do with the money they would save by only operating one car in a household. Rather than pitting transit against driving, the knee-jerk tradition, we pitted specifically:

• a second car against a trip to Fiji on CP Air for a young couple.
• a second car against a finished basement done by the spouse who had been laid off. (During the energy boom lots of people had bought homes with unfinished basements to fix up later.)
• a second car against a month's worth of groceries for a family of four (art work of happy kids greeting mom who is carrying groceries).

Several interesting things:

• Service cutbacks got lots of free publicity but our campaign ended with positive news about some new services that had been buried in broadcast media.
• Monthly pass sales which had been down by 20% or more against same-month previous year went back to bounce around 0%.
• Car dealers went to City Council and complained. In addition to a cut across all city agencies, council accepted a motion to further slash Edmonton Transit's advertising budget due to hurting private industry.
• I started thinking about other lines of work.

Definitely, ownership costs can only be tackled effectively by showing people what else they could be doing with the money. At the same time, rail and transit marketers need to separately address out-of-pocket costs, which they more typically do.

On a personal note: when I was married we were investigated by our insurance company because we weren't driving enough and only had one car. Later, when I spent a month in Europe with accumulated vacation days there were Denver transit colleagues who couldn't understand how I could afford it. I had to point out to them that I didn't have a car (walked a couple of blocks to Enterprise when I really needed one). In other words, auto fixed costs are unnoticed.

 

[dwebarts]

Many cars get better than 30mpg, but many people drive trucks, minivans and SUVs.
Ford and GM have almost stopped making cars.

This is truly annoying to those of us that won't buy a vehicle that gets under 35mpg. In urban/urban-adjacent communities, it's ridiculous to see the size of vehicles people use that could easily be replaced by a sub-compact.

What's worse is when someone in a high ride-height vehicle parks right up against a crosswalk so that pedestrians and drivers don't have a clear line of sight to each other.

 

[sttom]

In working with transit marketing projects it usually came out that out-of-pocket costs (gas, minor maintenance, parking) are watched closely while depreciation and insurance and registration fees are rarely a factor.

In 1982 during the start of the energy crash in Alberta we ran a really effective campaign that showed what people could do with the money they would save by only operating one car in a household. Rather than pitting transit against driving, the knee-jerk tradition, we pitted specifically:

• a second car against a trip to Fiji on CP Air for a young couple.
• a second car against a finished basement done by the spouse who had been laid off. (During the energy boom lots of people had bought homes with unfinished basements to fix up later.)
• a second car against a month's worth of groceries for a family of four (art work of happy kids greeting mom who is carrying groceries).

Several interesting things:

• Service cutbacks got lots of free publicity but our campaign ended with positive news about some new services that had been buried in broadcast media.
• Monthly pass sales which had been down by 20% or more against same-month previous year went back to bounce around 0%.
• Car dealers went to City Council and complained. In addition to a cut across all city agencies, council accepted a motion to further slash Edmonton Transit's advertising budget due to hurting private industry.
• I started thinking about other lines of work.

Definitely, ownership costs can only be tackled effectively by showing people what else they could be doing with the money. At the same time, rail and transit marketers need to separately address out-of-pocket costs, which they more typically do.

On a personal note: when I was married we were investigated by our insurance company because we weren't driving enough and only had one car. Later, when I spent a month in Europe with accumulated vacation days there were Denver transit colleagues who couldn't understand how I could afford it. I had to point out to them that I didn't have a car (walked a couple of blocks to Enterprise when I really needed one). In other words, auto fixed costs are unnoticed.

Another thing we really need is better development patterns and a useable transit system. Where I live, we have the population and business density to sustain a route with 20 minutes headways, but we have a handful of routes running about as frequently as Amtrak's corridor routes and they aren't planned well enough to enable any part of the route to have a useful service. Which sucks since I would give my car up for the bus if I could, pre pandemic at least. It really doesn't take much for people to not need a second car and we don't do it. I get that a lot of it comes to business, but in my mind, they wanted a "free market". Which means to government doesn't have to guarantee that their market never changes.

 

[MARC Rider]

Many cars get better than 30mpg, but many people drive trucks, minivans and SUVs.
Ford and GM have almost stopped making cars.

Also, maybe the new cars get "better than 30 mpg," but most people don't drive new cars, and new cars are getting more and more expensive to the point that many people can't afford them anymore.

Plus, lots of vehicles may get "better than 30 mpg" on the EPA Highway driving test, but that doesn't mean they get 30 mpg in actual on-road use. Many manufacturers game the fuel economy tests, designing the vehicles so that they get high scores on the Highway driving part, even if the average on-road fuel economy is much less. In fact, EPA has been tinkering with the fuel economy test method and sticker labels over the past 20 years in order to make fuel economy ratings me more in synch with what you actually get on the road. At the very least, be sure to cite the "combined" fuel economy number, not the "highway" rating.

 

[daybeers]

Another thing we really need is better development patterns and a useable transit system.

Ding ding ding!! This is it. I'm just waiting for the inevitable crash of the housing market and economy due to North American suburban development in a much bigger fashion than 2008 or the 1930s ever did. I wish I was kidding.

 

[Ziv]

Which is why a lot of people buy 3 to 5 year old cars with 50k to 60k miles on them and keep them for just 3 years. The worst depreciation is already over with and if you choose a reliable car, your maintenance costs are still fairly low (and your resale value is still fairly decent) if you sell the car before it gets to 100k miles. The first year depreciation is the year that kills the value of a new car unless you own it for more than 10 years. It is still expensive but if you value your time and freedom it is hard to live without a car in the US.
I have lived abroad and with the mass transit systems in many places you can live fairly well without a car, but it is still pretty lame to be riding a train or a bus with a passel of strangers when you could be driving in a car with just you and your spouse or your friends. Rich people in Europe and Asia tend to espouse mass transit, but they frequently use private cars.

It is interesting how people react so much to the price of gas when it isn't even the biggest cost of running a car. That would be the depreciation of its initial cost. If you buy a car for $25k drive it 100,000 miles then sell for 5k you have spent $20k to drive 100k miles or 20 cents a mile. If gas is $3 a gallon and you get 30 miles per gallon that is 10 cents a mile, and most cars do better than 30mpg nowadays. Going from $3 to $4 increases the cost from 10 cents to 13 cents in this example still not a big change in the overall cost, as we haven't even talked about maintenance and insurance which are not insignificant. I tend to use the round number of 50 cents a mile for using my car, at which point a train ticket starts to look pretty good.

 

[BlackDiamond]

Which is why a lot of people buy 3 to 5 year old cars with 50k to 60k miles on them and keep them for just 3 years. The worst depreciation is already over with and if you choose a reliable car, your maintenance costs are still fairly low (and your resale value is still fairly decent) if you sell the car before it gets to 100k miles. The first year depreciation is the year that kills the value of a new car unless you own it for more than 10 years. It is still expensive but if you value your time and freedom it is hard to live without a car in the US.
I have lived abroad and with the mass transit systems in many places you can live fairly well without a car, but it is still pretty lame to be riding a train or a bus with a passel of strangers when you could be driving in a car with just you and your spouse or your friends. Rich people in Europe and Asia tend to espouse mass transit, but they frequently use private cars.

That is basically what we do. You can get some decent cars that were used by rental companies, well maintained and let go with a lot of miles left on them. With today's cars you can often get 200k miles out of them, although here in the Northeast sometimes the road salt rots out the bodies before the power train wears out.

 

[Tlcooper44]

Which is why a lot of people buy 3 to 5 year old cars with 50k to 60k miles on them and keep them for just 3 years. The worst depreciation is already over with and if you choose a reliable car, your maintenance costs are still fairly low (and your resale value is still fairly decent) if you sell the car before it gets to 100k miles. The first year depreciation is the year that kills the value of a new car unless you own it for more than 10 years. It is still expensive but if you value your time and freedom it is hard to live without a car in the US.
I have lived abroad and with the mass transit systems in many places you can live fairly well without a car, but it is still pretty lame to be riding a train or a bus with a passel of strangers when you could be driving in a car with just you and your spouse or your friends. Rich people in Europe and Asia tend to espouse mass transit, but they frequently use private cars.

As someone who is about to finally bite the bullet and get a car, this is likely my plan. The MBTA is great, and I lived in Boston for 4 years without it, but my wife and I moved to a nicer/cheaper apartment on the edge of Cambridge, and having a car just makes things easier, and makes our careers better...

even at 100k, getting a decent Toyota will be no problem, and you will likely get to drive it to 200k or over.

 

[MARC Rider]

Ding ding ding!! This is it. I'm just waiting for the inevitable crash of the housing market and economy due to North American suburban development in a much bigger fashion than 2008 or the 1930s ever did. I wish I was kidding.

The 2008 crash didn't stop suburban spawl. I'm not sure whether I'd want a 1930s style depression, as the last time around, a lot of the world slipped into some pretty nasty dictatorships, and the technology of propaganda and what they call "persuasive coercion" is even more developed than it was then.

Even if we weren't able to redevelop all the way to dense walkable transit-oriented communities everywhere, I'd like to see smaller neighborhoods, on the order of small towns, with smaller stores, and none of those awful 6-lane suburban arterials. In such a scenario, even if you couldn't walk anywhere, you could get around in street-legal golf carts with a maximum speed of 30 mph. They'd do fine with classic lead-acid battery technology, so they'd be cheap and reliable. Then you could rent or even own (if you wanted to dump 10s of thousands of dollars in a depreciating asset) a real car for weekends or road trips.

I'm definitely pessimistic about the prospect of sprawl control without a general societal collapse. A couple of weekends ago I had reason to visit some high school buddies in the far northwest fringes of Montgomery County, PA. We're talking about the area outside of Norristown, Plymouth Meeting, etc. along Germantown Pike. This area was country back when I was in high school. Now it's horrible snarling traffic, but a lot of the folks out there don't even want to set foot in Center City Philadelphia, which might be thriving, but people of normal means can't afford to live there anymore. Then last weekend, I had a meeting of my ski club in Arlington, Virginia. Arrgghh! The Capital Beltway. Need I say more? And I don't think the new administration in Richmond has any interest in taming sprawl.

 

[daybeers]

The 2008 crash didn't stop suburban spawl. I'm not sure whether I'd want a 1930s style depression, as the last time around, a lot of the world slipped into some pretty nasty dictatorships, and the technology of propaganda and what they call "persuasive coercion" is even more developed than it was then.

Even if we weren't able to redevelop all the way to dense walkable transit-oriented communities everywhere, I'd like to see smaller neighborhoods, on the order of small towns, with smaller stores, and none of those awful 6-lane suburban arterials. In such a scenario, even if you couldn't walk anywhere, you could get around in street-legal golf carts with a maximum speed of 30 mph. They'd do fine with classic lead-acid battery technology, so they'd be cheap and reliable. Then you could rent or even own (if you wanted to dump 10s of thousands of dollars in a depreciating asset) a real car for weekends or road trips.

I'm definitely pessimistic about the prospect of sprawl control without a general societal collapse. A couple of weekends ago I had reason to visit some high school buddies in the far northwest fringes of Montgomery County, PA. We're talking about the area outside of Norristown, Plymouth Meeting, etc. along Germantown Pike. This area was country back when I was in high school. Now it's horrible snarling traffic, but a lot of the folks out there don't even want to set foot in Center City Philadelphia, which might be thriving, but people of normal means can't afford to live there anymore. Then last weekend, I had a meeting of my ski club in Arlington, Virginia. Arrgghh! The Capital Beltway. Need I say more? And I don't think the new administration in Richmond has any interest in taming sprawl.

Check out Strong Towns and the Not Just Bikes Youtube channel for more

 

[jis]

Historically, rising gas prices have tended to marginally increase support for and ridership of Amtrak. However, it is not clear to me that the current rise in gas prices will sustain, as oil prices will come down as soon as the next COVID variant hits around the world. And that is likely to happen as the night follows the day.

Besides, it is not like Amtrak prices are staying stable or going down either, though their rise is for a reason unrelated to gas prices as such.

 

[pennyk]

MODERATOR NOTE: please try to steer the discussion back to the topic of whether the high cost of fuel will impact Amtrak fares.

Thanks.

 

[sttom]

The 2008 crash didn't stop suburban spawl. I'm not sure whether I'd want a 1930s style depression, as the last time around, a lot of the world slipped into some pretty nasty dictatorships, and the technology of propaganda and what they call "persuasive coercion" is even more developed than it was then.

Even if we weren't able to redevelop all the way to dense walkable transit-oriented communities everywhere, I'd like to see smaller neighborhoods, on the order of small towns, with smaller stores, and none of those awful 6-lane suburban arterials. In such a scenario, even if you couldn't walk anywhere, you could get around in street-legal golf carts with a maximum speed of 30 mph. They'd do fine with classic lead-acid battery technology, so they'd be cheap and reliable. Then you could rent or even own (if you wanted to dump 10s of thousands of dollars in a depreciating asset) a real car for weekends or road trips.

I'm definitely pessimistic about the prospect of sprawl control without a general societal collapse. A couple of weekends ago I had reason to visit some high school buddies in the far northwest fringes of Montgomery County, PA. We're talking about the area outside of Norristown, Plymouth Meeting, etc. along Germantown Pike. This area was country back when I was in high school. Now it's horrible snarling traffic, but a lot of the folks out there don't even want to set foot in Center City Philadelphia, which might be thriving, but people of normal means can't afford to live there anymore. Then last weekend, I had a meeting of my ski club in Arlington, Virginia. Arrgghh! The Capital Beltway. Need I say more? And I don't think the new administration in Richmond has any interest in taming sprawl.

It's going to take more than just a housing crash to change building patterns. That would take action on the part of the state government with respect to zoning and building codes, their commitment to transit (Amtrak included), and changing the road layout in suburban developments. The last one would be the hardest since some houses would have to be demolished to make the road network less indirect. But that's an entire other discussion.

As to the effect of high gas prices on Amtrak, it can have an impact, but what is their ability to sustain that gain? There is only so much to be gained out of the existing and proposed 2035 network. For me at least, traffic is the biggest deterant to traveling over gas prices. For example, I'd go to Reno more than I do if Amtraks 3-4 Thruway buses were trains. The traffic between Fairfield and Roseville is so terrible most times of the day, any day of the week that gas could be 59 cents and I still would choose not to go.