Category: Business

The transportation sector constitutes a vital component of the growth of the economy in every country. It is composed of several modes, i.e., the railroad, air, water, pipelines, cables, etc. However, these modes are not substitutes but rather compliments to each other. Factors such as governmental control, the control of the prices, the regulations as well as the cost structure are just some of the few elements that distinguish the modes of transportation from each other. The paper seeks to compare and contrast the various modes of transportation with particular regard to the transport economics, government actions, pricing, the cost structure and the measures undertaken for damage prevention. The modes of transport under examination include road, rail, air, pipeline, space, cable and water transport.

Transport Economics

The transport-related economics forms a subdivision of economics that mainly concerns itself about how resources get distributed to the various modes of transportation. It involves a combination of transport engineering and economics. However, the main concern is the movement of goods over places. Matters of privatization, the pricing of various modes of transportation, nationalization, pricing, and demand for the transportation systems appear as its constituent aspects. In economics, the higher the prices of a commodity, the less it is consumed unless it is on a monopolistic market. Likewise, the more expensive the road transport sector is, for example, road, rail, or air, the less it is likely to be used by the people. Again, the more time it takes to travel from one point to another, the less the likeliness is that people will move from destination C to D. In the United States of America, both roads, pipeline, rail, air, cables transportation, and ships are to a large extend public. What pushes the government to maintain these modes of transportation as public is the importance of the transportation network for the economic development of the United States of America. If the transportation system was to be privately owned, regulation of prices would be a bit problematic, thus jeopardizing the economic structure of the country as a result of the inability of the people to travel. The railroads are privately owned and operate on private tracks. Again, concerning pipelines, the gas and oil transportation is done privately. Airlines are owned privately, but the airports are controlled by the government. The modes of transportation carrying a large number of people like the ferries and urban trains are under public ownership. Even the buses carrying large numbers of people are under the public ownership. Initially, the sector was under the private ownership, but later on, the private firms found it difficult to maintain. Therefore, after World War II, most mass carriers became publicly owned. Private firms usually construct the vehicles, the aircraft, the ships, the ferries, rails, and cables. Unlike other modes of transportation, ships may either be privately or publicly owned. Roads are the most important modes of transportation in the USA, accounting for more than four-fifths of the overall transportation sector. It majorly transports people requiring fast transportation over short distances. Rail is more preferable in heavy cargo transportation. Air, although expensive, is preferred for the carriage of individuals and goods requiring faster transportation over long distances. Pipeline becomes necessary in transporting liquid substances like oil and gas that could cause damage to the roads if transported by vehicles. Water transport is the most preferred agent when carrying hefty materials over long distances. Cables are preferred in transporting items that are incapable of transportation by road, rail, air, pipeline, etc. Therefore, all the modes of transport must be treated as compliments to each other. They are all necessary, and the transportation would be paralyzed without even one of the modes.

Pricing of Various Transportation Modes

Transportation pricing between different modes of transportation is determined by the quality of service offered and the value provided. If the value of the mode of transport is too small and people will not use it, it means that the prices will go down to attract more customers. Since time is of essence in transportation, it also affects prices. It means that the speed of the mode of transportation is necessary. For example, the use of airplanes becomes more expensive than the use of cars because of the speed. Air transport is faster and more valuable than road transport. The weight of items for transportation also affects prices. For example, transporting oil via road transport is more expensive than transporting via pipelines. This is because pipelines are faster and more efficient, and do not incur a lot of costs like the road transport. Similarly, transporting cargo via water is cheaper than road because the ship carries a large volume once and with minimal risks of loss. The use of the road, on the other hand, may need several trips to finish the transportation. The prices are also set depending on the cost of service. For example, the cost of maintaining an airplane will be much higher than the cost of maintaining a train or a motor vehicle. The cost of buying fuel and oil for an airplane is more expensive than the cost of buying fuel and oil for a car. The pipeline, on the other hand, is cheaper because only the one-time cost of laying the pipeline is required. The same scenario applies to cables. The prices charged cannot be less than the cost of the service offered; otherwise, the carrier would be operating at a loss. Prices may also be determined by congestion: when there is a traffic jam, people tend to use other alternatives that are faster. For example, the prices of motor vehicles will increase during congestion peaking periods. The price of transporting oil via pipeline also becomes expensive when the prices for oil upsurge.

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Variation in the Cost Structure of Various Transportation Modes

There are two types of costs involved in the transport sector. These are the fixed costs and the operating costs. Regarding the fixed costs, both railways and roads (highways) incur costs related to land, the construction of railway and road, and rolling stock. Pipeline construction also requires incurring the cost of land and the building of the pipelines, except the rolling stock costs. Air transport is also not an exception. The cost of land on which airports rest has to be incurred. The construction of the airports and the aircraft also comprises an essential element in running the air transport business and must, therefore, be incurred as a fixed cost. For the maritime business, the cost of land must be incurred. Similarly, the cost of building and maintaining harbors and the ships is also incurred as a fixed cost.

However, the operational costs of various modes of transport differ considerably, depending on the mode of transportation under question. Operational costs include the cost of buying fuel, the maintenance costs, and energy. The rail and road transport require rail and road maintenance occasionally. The maintenance comes with a price. Buying fuel to ensure the locomotion of the trains and the motor vehicles is also inevitable; therefore, it is treated as an operational cost. Labor costs also get involved when the trains and the vehicles get a breakdown. Pipelines, on other hand, do not require fuel. Pipelines only require the cost of maintenance and energy to move the oil to another destination. Just like rail and road, the air transport requires the regular purchase of fuel, labor costs associated with the maintenance of the airplanes and the airports. Likewise, the ships and ferries require the maintenance, labor and fuel costs to ensure efficient running.

Other variations in costs of different modes of transport are dependent on the elasticity of demand. Goods worth a higher value attract a lot of transportation costs as compared to lower value goods. Sometimes, such variations cause a lot of competition between two modes of transport. In most cases, for example, competition emerges between the rail and trucks over the transportation of heavy goods. For one to keep abreast of the other, there is a need to look for ways that lower the costs to ensure cheap prices and quality service to attract more customers.

However, the costs enumerated above relate to the operator costs. The customers also bear a certain cost that varies with the mode of transport used. As for the rail transport, the customers’ costs include the packaging, loading, offloading, and the transit costs. The cost associated with the loss of goods during transit is also born by the client. The prices above apply to air transportation. However, they do not apply in the case of a pipeline. For the water transportation, the same prices apply, except the railway siding costs. For the road transportation, the same costs still apply. However, the costs do not apply in the case of passengers as they only incur the ingress and egress costs. The modes of transport also bear the financial and economic costs. These costs include all the costs as mentioned above, plus the cost of taxation. For the rail transport, the railway companies are responsible for these costs. In the case of the ship, pipeline, road, and air transport, the government is in charge of these costs.

Governmental Action in Various Transportation Modes

The government intervenes in the transport sector to ensure that the prices are affordable to the general public and that there is no exploitation. The government is alert to the fact that the sector of carriage is very vital to the movement of people, which is necessary for the economic development of the country; therefore, it has a responsibility to ensure that the transport networks are efficient and that the prices are affordable. In the case of road transport, the government ensures that it takes the responsibility of constructing proper roads to ease transportation. It also ensures that there are road safety rules to ensure safe transportation. However, the buses and other public vehicles running on the roads are privately owned. Regarding the rail transport network, the government ensures that the rails are well-built and managed by railway companies that are in charge of levying taxes. In this sector, the government ensures as well that safety standards are maintained to guarantee the safe travel of the passengers. For the air transport, the government attempts to ensure that the air terminals such as the airports and airstrips are well-built and maintained. However, other privately owned entities do the airplane making and operations. Therefore, the government ensures smooth operations of these venues and controls the prices to ensure an efficiently operating sector. Pipelines are also built by the government to ease congestion on the road. The government involves regulations because if the sector was to be left in the hands of the private owners, it would be prone to the manipulations of the public. The government builds the water transport harbors, but the ships may either be publicly or privately owned.

Across all the modes of transport, the government ensures that the environment is exposed to great protection. The emission of gasses must be at the required level. The government further indulges in the privatization of the modes of transport as a way of ensuring reforms in the sector of carriage. In order to manage these avenues, the government uses institutional measures, the legal and regulatory frameworks to achieve it. Therefore, all modes of transport are regulated by the government.

Legal Considerations in the Running of Various Transportation Modes

The transportation law comprises of the clear provisions on how both the modes of transport and the infrastructures are managed for the general benefit of the public. The transportation law does not appear in one statute, and this means every mode is controlled under a separate law or Act of Parliament. Usually, the Constitution gives the Parliament or the Congress the authority to enact legislations governing various transport modes and infrastructure. Under the regulations, the state is given the power to establish transport authorities to take care of different ways of transportation. In America, the Department of Transportation has established several authorities to control the efficiency of the transportation networks. For example, it established a railroad authority, the air transport administration authority, railway authority, etc.

The regulations dictate that for any person to start a road, rail, plane, pipeline, or even water transportation business operations, such entities must get registered first. The regulations also require these modes of transportation to be insured to minimize the risk of loss for the customers in the course of transportation. For the pipelines, the law provides that they should be laid at a particular preferred distance below the earth’s surface. Safe transportation of hazardous materials also gets legal attention. The oil transport, for example, is very harmful to the environment if carelessly done. Therefore, the government sets rules to ensure that the pipelines are well-maintained and that regulations regarding the pipelines and water transport and enhancing the environmental protection are set. Issues concerning the speed and the safety of the modes of transportation can also originate in the transport regulations.

Damage Prevention for the Transportation Modes

There is no mode of transportation which is wholly safe by itself. For this reason, the transport regulators have initiated means of reducing or minimizing the risk of damage. For the water and railway transport, the goods under transportation must be sealed correctly and labeled if possible. The use of pipelines has saved and minimized the risk of oil spillage on the roads leading to fires. Damage is prevented by ensuring that the pipes are kept deep in the ground. For the railroad transport, the risk of harm is minimized by establishment of punitive regulations by the government. For example, a limitation as to the number of passengers and the weight of the load could form the matter for consideration. The potentially dangerous vehicles also get locked out of the road. The government further minimizes risks by demanding the insurance of all the transport operators. For the air travel, the airplanes must have a standard weight typical of each plane. Therefore, the planes are not expected to carry the luggage beyond the limits required. 

Analysis

From the above discussion, it is clear that the government has a role to play in virtually all the modes of transport. However, the role of the government is limited to ensuring the efficiency in the running of the transportation sector and affordable transportation prices to the people. The government achieves this by making sure that there is an abundant regulatory framework for the establishment and operation of the transportation sector. Such regulations go hand in hand with ensuring the safety of the customers and reducing the risk of damage. In other words, the more risky the mode of transport is, the heavier the regulations are. For example, the air and water transport have tight rules because of the high risk of harm. It should also be mentioned that the prices get determined by the cost of service incurred by the mode of transport and time. For example, air transport is faster than road transport; therefore, the former is more expensive than the latter. Again, the choice of the given mode of transport is determined by the economies of scale. The forces of demand and supply play a fundamental role in ensuring the selection of a suitable mode of transportation. All the modes of transportation have to incur the costs of transportation that include maintenance, fuelling, and land charges. However, some forms of transport, like roads and pipelines, are guarded by the government because they constitute a very significant part of the economy.

Conclusion

In conclusion, the transport sector is very crucial for building a healthy economy as it involves the mobility of workers from one place to another and also the transportation of goods. However, the modes of transport should not be regarded as being in competition, but rather as alternatives to each other. The laws of demand and supply determine the prices and the choice of the mode of transportation. Government control is also necessary for all modes of transportation to ensure a smooth running of the transport sector. As such, the regulation of the modes of transportation is necessary. Therefore, various modes of transport do not differ significantly but rather are alternatives to each other.

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