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How gas prices are driving Amtrak's ridership problems

A few weeks ago I did a story on Amtrak's money woes. Ridership was dropping, and gas prices were listed as a causal factor. Here's what Amtrak CEO and President Joseph Boardman wrote in a Feb. 9 memo to employees.

"Continued low gas and oil prices are hurting our ridership levels. Two years ago, the price of crude oil was more than $100 a barrel. Last year, it was $60 a barrel. Today, it is has fallen to almost $25 a barrel. As a result, the price of gas is now about $2 a gallon nationally – the lowest it has been since 2009. When gas prices are cheap, many customers who normally ride with Amtrak are either choosing to drive for shorter trips, or choosing to fly for longer trips. Either way, our bottom line takes a big hit."

Amtrak's half way through its fiscal year, which ends in September, and it's falling short of its budget targets. Ridership dropped about two percent from its high point in 2013 of 31.5 million to 2015, when Amtrak reported almost 30.9 million riders.

A cursory look at the past 15 years of gas prices, as compared to Amtrak ridership, shows a surprisingly consistent correlation between the two. Boardman's not wrong.

They share almost exactly the same peaks and valleys.

"Those low oil prices really put people in a different place and it puts them there in a hurry," said Boardman in a phone conversation last week.

Obviously the relationship isn't exactly in synch. Fuel costs aren't the only thing driving ridership. Until 2015 Amtrak had touted steady ridership growth, and gas prices weren't the only factor. CityLab's Eric Jaffe explained in 2012, when ridership was still surging, the factors pushing passenger numbers. This paragraph in particular stood out.

"What's most impressive about Amtrak's recent success is that it's not attributable to any one clear factor but rather speaks to a general attraction toward train travel. Amtrak itself points to improved services like WiFi and electronic ticketing, as well as high gas prices. In the Northeast Corridor the shift reflects sustained discontent with air travel; as the New York Times recently reported, Amtrak now captures 75 percent of the intercity market between New York and Washington, and 54 percent between New York and Boston. A growing perception of the train as a 'mobile office' surely contributes as well."

But Amtrak has proven to be more sensitive to oil prices' fluctuations than regional rail systems. Last week SEPTA officials said they've seen a slight drop in ridership in recent months likely linked to the price at the pump, but said it wasn't enough to cause concern. That mirrors ridership trend research that found demand for commuter rail service will eventually change if gas prices go up or down over a long period of time, but stays fairly inelastic in the short term. A 2014 study found that a 10 percent increase in gas prices resulted in only a 1 percent shift in ridership on commuter rail, said Hiroyuki Iseki, a University of Maryland assistant professor who was an author of a 2014 study on the topic.

"It takes for them to find alternatives ways of travel after they start perceiving that the gas price is drastically changing," he said. "That's why we think there is a substantial time lag."

Commuter rail passengers are more creatures of habit and price isn't necessarily the only priority. Avoiding traffic and the possibility of getting to a destination on time are benefits of commuter rail that might keep a person riding even if driving becomes cheaper, Iseki and SEPTA officials said. Those different priorities are apparent in one of the biggest criticisms SEPTA has faced lately, a trend toward lateness in its service.

Amtrak is different, though. While the Northeast Corridor carries a lot of business travelers, longer routes mean more passengers whose travel times are flexible. Over longer distances there are also better alternatives. Along with driving, travelers have the option of flying to their destinations.

"I think for certain distances, longer than 400 miles or 500 miles, probably that's the case," Iseki said. "I would think that the Amtrak riders are more elastic."

Meanwhile, the benefits that airlines and drivers accrue from lower gas prices, cheaper fuel, are largely denied to Amtrak. Only a segment of its rail service operates on diesel, Boardman said. Most of the network is electric.

Amtrak may have to get used to a new normal, said Boardman.

"We do see this going on into the future this next year," he said. "We have to get set up for 2017 as well."

Amtrak has been making moves to mitigate the passenger bleed, Boardman said. They've tried to improve customer service, offer pricing discounts for students and allowed pets on trains, he said. They're also making cuts.

"I'm going to take this one step at a time," Boardman said. "I'm beginning to look at, 'what can we do?' What you really have to do is get down below the senior management and interact with the middle management. How do I cut down my labor costs without impacting negatively the larger part of my work force."

The clock is ticking. Along with the end of the fiscal year, September will mark Boardman's retirement from Amtrak.

"I would a heck of a lot prefer to do something different in my last seven months than this," he said.