Dive Brief:

• BNSF is limiting shipments of diesel and other fuel products into California after labor constraints and severe weather exacerbated congestion, according to a Thursday customer notification. 
• The railroad said it will issue a temporary embargo until July 31 for all commodities destined to California from Illinois, Texas and 12 other states within the BNSF network. The embargo includes shipments of diesel, renewable diesel and diesel exhaust fluid, which is needed to operate medium- and heavy-duty trucks manufactured after 2010.
• Fuel shippers will be able to request a permit to ship to embargoed destinations, the notice said. Diesel and other critical commodities will be exempted from the temporary embargo beginning July 6.

Dive Insight:

A slowdown in fuel-related shipments could temporarily stress supply and push up prices at the pump. Diesel fuel prices have already soared to new records, hitting $5.72 a gallon in the week of June 13. 

Beyond diesel, disruptions to the supply of renewable diesel and diesel exhaust fluid could also carry major implications for the trucking industry. DEF is required in modern diesel engines and trucks in California have increasingly relied on renewable diesel as the state pursues a transition to clean energy.

Railroads including BNSF and Union Pacific had asked companies earlier this year to voluntarily limit their shipments in a bid to encourage network fluidity. The moves prompted shippers of diesel and DEF to warn of potential consequences, including higher prices and reduced trucking capacity.  

"There'll be a significant impact on DEF supply potentially stranding a large number of trucks," Shameek Konar, CEO of Pilot Flying J, said during a federal hearing on rail service issues in April. Every rail car not delivered on time reduces "trucking potential by 5 million miles."

Konar said Union Pacific had threatened to place an embargo on Pilot's shipments earlier this year, though a company spokesperson told Transport Dive after the hearing the company was able to work with the railroad "toward a positive resolution." 

BNSF’s embargo impacts its Southern Transcon corridor running from Chicago to Southern California, which it called its “core intermodal artery” in a June 23 filing to the Surface Transportation Board. Staffing issues and severe weather events have constrained service, while low supply of chassis further inland has caused backups in Chicago-area terminals. 

The railroad said the embargo is necessary to keep the network fluid, particularly ahead of the July 4 holiday when it expects a rise in employees taking vacation time. To increase crew availability, BNSF is offering vacation buybacks and has temporarily transferred crew members from other parts of the network to the Southern Transcon corridor.

BNSF will also lease 75 locomotives and adjust trip plans so trains can bypass the most troubled parts of the network. The railroad is additionally working the San Pedro Bay ports to improve slot allocations and ensure cargo headed to Chicago will have sufficient truck and chassis capacity once it arrives. Approximately 28 trains were waiting for arrival slots at Chicago intermodal facilities at the beginning of the week of June 20, BNSF said.

“While we are encouraged by our overall trends and starting to see some green shoots in our challenged areas, our overall message is that recovery in those challenged parts of our network remains choppy,” the railroad said.