Report: Norfolk Southern Saves Millions in Fuel Costs

NORFOLK, Va. – Norfolk Southern has saved millions in fuel costs by purchasing its fuel in advance, The Virginian-Pilot reported last month.

“In 2001, as diesel fuel prices started to fluctuate more and more, Norfolk Southern abandoned its longtime practice of buying fuel on the market. Instead, it began buying in advance through a financial technique called hedging to lock in prices for much of its diesel fuel,” the newspaper reported.

In the first quarter of 2004, Norfolk Southern could have saved $22 million, if it used its monthly allotment. The company earned $158 million in the first quarter.

“The market’s gone up and we look like we’re smart,” Henry C. Wolf, Norfolk Southern’s vice chairman and chief financial officer, told The Virginian-Pilot. “But we happened to make a decision that we wanted to reduce our exposure to the volatility of fuel prices.”

Other major railroads are also hedging fuel prices, the newspaper reported. Burlington Northern Santa Fe, for example, saved 17 cents per gallon, according to the newspaper’s report.