The major economic impacts that result from petroleum supply interruptions and the subsequent effects on the demand for freight transportation are described. The analysis involved a simulation of the effects of three different levels of fuel supply shortfall on intercity freight transportation. The research included the use of three economic and transportation models to simulate the economic impacts of oil shortfalls and the resulting change in freight transportation demand as expressed in tons shipped, ton miles of travel, and fuel use. Economic effects are discussed for a base case and then for 7, 14, and 23 percent petroleum shortfalls. The demand for freight transportation is determined by the output of various commodity sectors that generate traffic for the truck, rail, water, air, and pipeline modes. The effects of various diesel fuel price levels are also examined. The analysis suggests that at low, or controlled, fuel prices the more significant impacts for freight movements will be the reduction in output in the bulk commodity sectors, which are dominated by the waterway and rail modes. At high fuel prices (ie, equilibrium levels), shipping is significantly decreased in all commodity sectors, but modal shifts are likely to occur from truck to rail and even from rail to water in some corridors.

The United States has experienced significant economic problems associated with two of the three major interruptions in the world supply of petroleum--the Arab oil embargo in 1973-1974 and the Iranian revolution in 1979. Less difficulty was encountered with the loss of crude oil due to the Iran-Iraq war. High inventories coupled with reduced demand have made the loss of those supplies barely noticeable. Saudi Arabia increased its oil production to partially compensate for a reduction in the oil spot-market pr ice in order to eventually produce a unified Organization of Petroleum Exporting Countries (OPEC) pr ice. Competing economic and political goals in the Middle East cause this region to remain volatile, which suggests that future disruptions in petroleum supply are highly probable, if not inevitable.