U.S. Regional Transportation Use and Cost Patterns

Transportation Cost Patterns, 2005

We can draw some valuable information from this comparison:

• Average transportation costs, based on the five major modes of transportation, are substantially lower in Texas and Florida than in the other eight states sampled.
• Georgia has a substantially higher average transportation cost—indeed, far and away the highest in the sample.
• Despite geographical variations, the other seven states do not have large differences in average transportation costs, ranging only from $7.20 in Ohio to $8.60 in New York.

One major determinant of regional variation in transportation cost is the primary mode of transport. If a state economy is more dependent on an expensive mode, its average transportation cost will be relatively high compared to other states. Air is the most expensive mode in terms of carrying a ton-mile of goods, with trucking the second-most expensive. Indeed, the differences in these transportation costs are enormous compared to rail or water—air transport runs an average of 67 cents per ton-mile, while water costs less than one cent per ton-mile. Therefore, a state such as Georgia, which relies on air for 8.8% of its freight transportation, has a much higher average cost than New York, which relies on air for only 1.9% of its total transport. Florida and Texas are significantly less dependent on air freight transportation, something that is largely determined by geography, transportation infrastructure, and what's being transported. Texas' major mode of transportation is pipelines (72.6%), no surprise given its oil-based export economy. Florida, on the other hand, benefits from the ability to make substantial use of water transportation (74.6%). Water and pipelines are the cheapest modes of transport. Thus, a state's primary modes of transportation are the major factor determining its average transportation costs.

Another determinant of the regional variation in transportation costs is the relative share of transportation in a state's total economic activity. In other words, average transportation costs are directly related to freight transportation's share of total gross state product (GSP). Among the 10 sampled states, Texas' and Florida's freight transportation sectors provide a larger chunk of GSP than Georgia's sector. This, of course, can be either a vicious or virtuous cycle: the lower a state's transportation costs, the more transportation business it does, and the larger its share of GSP—or vice versa.

by Mohammad Qamar Iqbal