The railroad strike was averted 24 hours before the deadline, ‘an important win for our economy and the American people,’ President Biden says.
Railroad unions agreed to a deal, averting a massive strike that would have snarled supply chains and halted the supply of key and essential commodities such as grain and ethanol, which is blended with gasoline.
The tentative agreement is awaiting a ratification vote from 60,000 union members who work for Warren Buffett’s BNSF, Union Pacific (UNP) – Get Union Pacific Corporation Report and other major railroads.
Employees of the railroads reached the accord 24 hours before the Friday deadline, narrowly averting a shutdown in the delivery of energy and agricultural goods.
Raises and ‘Peace of Mind’
Railroad workers said they have been penalized for taking time off to go to medical appointments and even for family emergencies.
The National Carriers’ Conference Committee, which represents the nation’s freight railroads in national collective bargaining, said the tentative agreements call for a 24% wage increase during the five years from 2020 through 2024, with a 14.1% wage increase effective immediately along with five annual $1,000 lump-sum payments.
Agreements were reached with the Brotherhood of Locomotive Engineers and Trainmen Division of the International Brotherhood of Teamsters; the International Association of Sheet Metal, Air, Rail and Transportation Workers – Transportation Division; and the Brotherhood of Railroad Signalmen. Together, the three unions represent some 60,000 railroad employees.
The tentative agreements follow the Aug. 16 recommendations by the Presidential Emergency Board.
The White House said the deal was reached after several weeks of talks and then a marathon session of negotiations in Washington last night.
President Joe Biden said the deal includes salary increases, improved working conditions and “peace of mind” with respect to health-care benefits.
“The tentative agreement reached tonight is an important win for our economy and the American people,” Biden said.
Bargaining had actually begun nearly three years ago. The new agreement gives railroad workers the health-care benefits they had fought for, including no increases to insurance copays and deductibles and time off for doctor appointments, said Jeremy Ferguson, president of the Smart Transportation Division, and Dennis Pierce, president of the Brotherhood of Locomotive Engineers and Trainmen, who represent conductors and engineers.
“For the first time, our unions were able to obtain negotiated contract language exempting time off for certain medical events from carrier attendance policies,” they said.
During the last 20 hours of nonstop negotiations, the unions reached an agreement that freezes the members monthly health care contributions at the end of the agreement, union presidents Ferguson and Pierce said. The two unions, the BLET and Smart-TD represent 125,000 active and retired rail employees,
Railroad workers received their quality-of-life requirements – the agreement creates “voluntary assigned days off for members working through freight service and all members will receive one additional paid day off,” they said.
Ahead of the bargaining deadline, freight railroads stopped accepting shipments of hazardous and security-sensitive materials and passenger rail company Amtrak stopped long-distance service on Wednesday.
Commodity Markets Decline
The commodity markets avoided what would have been major disruptions if the strike had occurred and lasted for more than a few days. That’s because shipments of energy and agricultural products such as grain would be delayed creating shortages and likely price spikes.
Crude oil prices fell 2.7% at last check.
The threat of a strike made the largest impact on ethanol, since 70% of the commodity is shipped by rail. Ethanol prices had shot up past the $2.60 per gallon mark on Sept. 14.
“Almost all ethanol is moved via rail and it is produced in the Midwest,” said Debnil Chowdhury, vice president of refining and marketing at S&P Global Commodity Insights.
The near record low inventory levels of gasoline and diesel in the U.S. are problematic since 15% of total crude and refined products are transported by rail, he said.
Food supplies could also have been disrupted due to where the U.S. is in its crop cycle, said Pete Meyer, head of grains and oilseeds analytics at S&P Global Commodity Insights.
Coal prices had also risen in anticipation of a strike and demand has increased due to the ongoing war in Ukraine and the European Union sanctions against Russian coal.
Impact on Gasoline Prices
Gasoline prices could have increased by 35 to 75 cents a gallon if the strike had lasted for more than a few days, Patrick De Haan, head of petroleum analysis for GasBuddy, the Boston provider of retail fuel pricing information and data, told TheStreet.
A strike would have reversed much of the reprieve drivers have received over the past three months. Gasoline prices have fallen for 13 consecutive weeks after reaching a national average high of $5.03 a gallon on June 14.
Ethanol is blended in gasoline and since it cannot flow in a petroleum pipeline, a strike would have impeded the capabilities of refiners, he said.