2022 in Review: US Freight System
The US freight system is at the dawn of a new age: slowly stabilizing from the shock of the pandemic and beginning to undergo several years of major investment. Our US-based transportation advisors look at the macro events that shaped the freight system in 2022.
When CPCS published its 2021 Freight Year in Review, freight system operations were at a boiling point.
Climate disasters, pandemic-related disruptions, and economic uncertainty had created a perfect storm that put supply chains under unprecedented stress. The freight system, usually invisible to most, was brought into the spotlight.
2022 has been another year of high visibility for the freight system. Luckily, the trend of events this year tended towards stability rather than the turmoil witnessed in 2021.
In particular, the federal government of the United States, with crucial support from public and private partners, took decisive action to stabilize freight operations. This included laying the groundwork to begin distributing funding from the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA), among other initiatives. These federal efforts lay the foundation for an “infrastructure decade” that will be driven primarily by state and local agencies and the private sector.
Here are some of the most important events that influenced the US freight system in 2022.
January: Spotlight on safety
The US Department of Transportation (USDOT) released a National Roadway Safety Strategy in early 2022, which recognized that roadway safety is in crisis and proposed actions to achieve a goal of zero roadway fatalities. The release of this strategy anticipated startling data released by the National Highway Traffic Safety Administration in May reporting the highest number of deaths related to motor vehicle crashes in 16 years. Compared to 2020, fatalities rose over 10 percent in 2021 to nearly 43,000. Truck-involved crash fatalities also saw a disturbing increase, rising almost 13 percent to 5,600 in 2021 (Figure 1).
Figure 1: Growing number of truck-related crashes both in absolute terms and relative to vehicle miles travelled (VMT)
February: Russia’s war in Ukraine
On February 24, Russia invaded eastern Ukraine, initiating perhaps the largest military conflict in Europe since World War II. The consequences have been dire, including a rising death toll, the destruction of cities and infrastructure, upheaval of daily life, and a refugee crisis. The war has also initiated serious supply chain problems, particularly for natural gas and agricultural products.
In response to Russia’s invasion, European countries and their allies reduced demand for Russian natural gas as a form of sanction. With similar demand and reduced supply, oil prices around the world skyrocketed.
In the US, the fossil fuel squeeze was felt acutely at the pump, with regular gas prices jumping over 40 percent in under four months (Figure 3). Since June, prices have fallen for a number of reasons, including reduced demand, suspended state motor fuels taxes, and the unprecedented release of 180 million barrels of oil from the federal strategic reserve.
Figure 3: US gas prices boomerang in 2022
Food prices, already inflated by supply chain problems caused by the COVID-19 pandemic and climate change-related impacts to agricultural production, were driven higher by Russia’s war in Ukraine and blocked shipping in the Black Sea.
Because Ukraine is one of the world’s largest exporters of grain and a major provider of food to the World Food Program, the United Nations (UN) warned that the war threatened to exacerbate world hunger. In July the UN brokered a deal to resume grain exports from the Black Sea, and, despite Russian inconstancy, the deal was renewed in November. This has helped to ease the price of grain and other food.
March: Cybersecurity concerns
Responding to recent high-profile cyberattacks on critical infrastructure, including last year’s Colonial Pipeline shutdown, an attack on meat supplier JBS USA, and additional security risks in the wake of Russia’s war in Ukraine, the federal government passed a law requiring reports of cyber incidents on critical infrastructure.
Specifically, the Cyber Incident Reporting for Critical Infrastructure Act of 2022 (CIRCIA) requires covered entities to report “significant” cyber incidents, breaches, and ransom payments to the Cybersecurity and Infrastructure Security Agency (CISA). By shedding light on the number and severity of these types of attacks—data that was previously unavailable to the government—the new law will help improve the resiliency and security of the nation’s infrastructure.
April: Rail service hearings
The Surface Transportation Board (STB) hosted a hearing on freight rail service called “Urgent Issues in Freight Rail Service” in late April.
The STB called the hearing in response to stakeholder complaints of unreliable freight rail service, underperformance on key indicators like average train speed, and ongoing rail workforce issues. The STB heard from senior officials at Class I railroads, affected shippers, unions, railroad human resources officials, and others to try to understand the forces behind the deterioration of rail service over the last year or so.
Rail shippers lamented the introduction of Precision Scheduled Railroading (PSR)—the consolidation of rail service into fewer, longer trains—as responsible for introducing less operational elasticity and lower reliability in rail service. The hearings also made it clear that rail labor shortages were a significant factor contributing to recent rail service disruptions.
The STB has proposed various amendments to rulemaking that attempt to improve rail service, including improvements to emergency rail service and increased access to reciprocal switching. Reciprocal switching, which had its own hearing in March 2022, requires railroads to move railcars short distances so that they can be transferred to and shipped by a competitor railroad.
In a February 2022 letter to the STB, the Rail Customer Coalition called for more access to reciprocal switching, arguing that it would introduce additional competition and more affordable service. Critics contend that regulating reciprocal switching represents a dramatic policy shift from the arguably very successful deregulation of railroads under the Staggers Rail Act of 1980. This shift towards re-regulation, they say, will introduce unnecessary inefficiencies into rail service.
May: Women in trucking
The Women in Trucking Association published a report based on a 2021 survey that reveals continued gender bias and harassment in the trucking industry.
More than 70 percent of women drivers report having experienced verbally offensive comments at least once, and 28 percent have received verbal threats. Nearly 60 percent report at least one experience of an unwanted physical advance on the job. Reducing harassment would generate a positive feedback loop for women in trucking, as safer working conditions would encourage more women to join the industry, which would further improve safety and working conditions. Encouraging more women in trucking would also help to address the acute driver shortage impacting the industry. In August, USDOT announced the new Women of Trucking Advisory Board (WOTAB) to encourage, hire, and retain more women in the industry.
June: Inflation soars
The 12-month inflation rate, which had been rising for months, peaked in the month of June at 9.1 percent (Figure 6), hitting a 40-year high. Overall inflation tapered in the latter half of 2022, though this reduction has been largely driven by falling gas and oil prices.
Figure 6: Inflation rate hit 40-year high in June 2022
Mirroring broader price trends, construction costs have also risen in 2022.
The National Highway Construction Cost Index (NHCCI), generated by the Federal Highway Administration, spiked 17 percent between Q4 2021, when the IIJA was passed, and Q2 2022 (Figure 7). Granted, the NHCCI likely moderated at the end of 2022 as the price of oil (reflected in the price of asphalt) fell. Nevertheless, higher construction costs mean that, unless project costs can be reduced, the IIJA’s historic infrastructure spending will not go as far as planned; higher costs and the same number of dollars will mean fewer funded projects.
Figure 7: National Highway Construction Cost Index (NHCCI), 2018-2022
July: Emissions reduction framework
The USDOT announced a Notice of Proposed Rulemaking that would require states and municipalities to set greenhouse gas reduction targets and monitor progress.
The rules would allow state Departments of Transportation (DOTs) and Metropolitan Planning Organizations (MPOs) to set their own declining targets and report their progress every two years to the Federal Highway Administration (FHWA). Many states already set such targets, but the new rulemaking would expand and standardize the requirement.
FHWA noted that significant federal funding is available for DOTs to invest in projects that help to reduce emissions, including many new programs under IIJA. Some State DOTs resisted the proposed rulemaking, arguing that they have little control over transportation emissions and that FHWA was exceeding its regulatory authority, but supporters contend that the rules offer states and MPOs sufficient flexibility and represent a valid form of performance measurement. The proposed rules, if implemented, would have significant impacts on the freight industry, as this sector is a major generator of greenhouse gas emissions.
The proposed rulemaking foreshadowed new US Environmental Protection Agency (EPA) truck emissions standards introduced in December. The EPA itself reports that these new regulations are 80 percent stricter and will require model year 2027 trucks to dramatically reduce ozone, particulate matter, nitrogen oxide, and carbon dioxide emissions.
While the new rules will help to reduce the environmental impact of trucking and improve air quality, some truckers and carriers note that the new rules are highly complex and may be challenging to adhere to.
August: FLOW of data
The USDOT convened the first meeting between members of the new Freight Logistics Optimization Works (FLOW) initiative.
FLOW officially began six months earlier with the goal of increasing transparency and efficiency in supply chain operations. USDOT serves as a steward in fostering cooperation and overseeing the secure exchange of supply chain data among public agencies and private industry.
Participants span the gamut of the supply chain, ranging from terminal operators and ports to beneficial cargo owners, and from shipping lines to rail and truck carriers. At the August meeting, participants had the opportunity to share their experiences with the FLOW initiative and discuss opportunities for future improvements.
It’s expected that private sector membership will continue to grow, which will offer more robust real-time supply chain information.
September: Hurricane Ian
The storm left millions of people without power; damaged roads and bridges; closed Port Tampa Bay, the Port of Savannah, and South Carolina Ports Authority terminals; cancelled flights; shut down the CSX railroad; and delayed trucking operations.
To ease supply chain stress, eight states suspended certain hours-of-service requirements and Florida waived many truck size and weight restrictions.
In addition to Hurricane Ian, several other climate disasters ravaged communities and destroyed infrastructure in 2022.
By mid-October 2022, the US had already experienced 15 billion-dollar weather events, including historic floods that brought up to a foot of rain to parts of Eastern Kentucky in July. In late December, a once-in-a-generation winter storm brought arctic temperatures, strong winds, and snow to a huge swath of the US, resulting in power outages, dangerous driving conditions, and thousands of cancelled flights.
October: Not enough water
In mid-October, the Mississippi River near Memphis, Tennessee, saw its lowest recorded water level ever due to a flash drought, dropping 20 feet in under three months (Figure 10).
The water levels were so low that thousands of barges were unable to navigate the river.
Because the Mississippi is a crucial node in the grain supply chain, carrying 60 percent of US grain exports, the river’s low water levels exacerbated problems with the supply of foodstuffs, already encumbered by Russia’s war in Ukraine. The historically low water levels also raised shipping prices, further contributing to inflation.
Alarmingly, experts believe that delays and closure of the Mississippi River may become more common as climate change contributes to more frequent extreme weather. It was only last year that Hurricane Ida disrupted barge traffic in Louisiana. The IIJA will invest over $4 billion toward improvements in the US inland ports and waterway system.
Figure 10: Water Levels of the Mississippi River at Memphis, TN in 2022
November: Decline in container volumes on the West Coast
The Ports of Los Angeles and Long Beach, which are historically among the busiest ports in the US and whose congestion was front and center in 2021, saw declining volumes in 2022, declines that continued in November.
In fact, the number of twenty-foot-equivalent units (TEUs) handled at the Port of Los Angeles fell over 21 percent between November 2021 and November 2022. At the Port of Long Beach, the decline was nearly 25 percent.
The Gulf Coast’s Port of Houston saw an 11 percent year-over-year increase in container volumes. The Port of Savannah handled a record 5.8 million containers in FY2022 and saw almost 10 percent growth in the first quarter of FY2023.
December: Rail shutdown averted
To top off a year of unparalleled federal action in support of improving supply chains and the efficient movement of goods, Congress voted in December to force an agreement between railroads and labor unions.
The bipartisan intervention shortly before the holiday season averted a strike that threatened to cost the economy up to $2 billion a day.
The tentative labor agreement had previously been brokered in September with the help of the US Department of Labor. However, one of the largest railroad unions, SMART-TD, voted not to ratify the deal in November, frustrated that it did not include any paid sick days.
After a tumultuous 2021, 2022 saw a return to some semblance of normalcy in daily life that was mirrored in the freight system.
While the US federal government has helped to stabilize freight operations where it can and lay the groundwork for a once-in-a-generation infrastructure investment, the real work to improve the freight system will be bottom-up, driven by state and local agencies and private industry.
Already, these partners are building on the federal framework, leveraging more than $185 billion in funding announced to date. States initiated almost 25,000 highway projects in 2022 using formula funds, including roadway widening, rehabilitation, and other improvements.
States and private industry are also starting to make use of competitive grants for a variety of projects, including planning for a multimodal logistics center in Utah, the rehabilitation of an important bridge in Newport, RI, and the conversion of an old rail yard into a staging area at the Port of Port Arthur in Texas.
In what other ways will the public and private sectors leverage these expanded federal funds? This is a question we’ll have to revisit in 2023.