When the U.S. military fires its first shot in the Iraqi desert, the reverberations will be felt back home on a number of fronts. One area that's sure to be shaken by military action will be the U.S. transportation industry.

Conventional wisdom holds that in wartime, freight transportation always suffers because diesel fuel prices rise and the military commandeers commercial transportation capacity. But this time around will be different, according to industry experts and military observers. There will indeed be an impact on transportation, they say—but it may be in ways shippers don't expect.

Any military action in the Middle East raises the possibility that the flow of petroleum from the world's richest oil-producing region might be halted. In theory, a resulting oil shortage would drive up diesel fuel prices. Those price hikes, in turn, would spell higher rates for shippers. That's just what you would expect to happen, yet it's unlikely this time around, say oil-industry experts.

During the last conflict with Iraq, the price of oil jumped for a brief period. According to the American Petroleum Institute in Washington, D.C., oil prices stood at $21.40 a barrel on Aug. 2, 1990, when Iraqi troops invaded Kuwait. Crude prices reached a high of $41.15 a barrel in October. By the start of the Desert Storm campaign on Jan. 16, 1991, prices had fallen to $21.44 a barrel. "It (the price of oil) came down quickly when the campaign (against Iraq) was like a knife through butter," says Tom Kloza, chief analyst for the Oil Price Information Service in Lakewood, N.J.

The world oil situation is much different today than it was a decade ago. In 1990, Iraq accounted for 7 percent, or 5 million, of the 66 million barrels of the world's daily oil production, says John Felmy, chief economist at the American Petroleum Institute. Today, Iraq only produces 2 1/2 million barrels of oil out of a daily global supply of 76 million barrels.

That's one reason experts contacted for this article predict that, even if oil prices should spike temporarily with the firing of the first shots, prices would quickly settle back down. In addition, although the Venezuelan crisis has pushed oil prices upward, a slow global economy has reduced overall demand for petroleum. If Middle East sources cut back production, moreover, other countries such as Russia would ramp up oil production, says transportation consultant Martin Labbe. A spell of cold weather, however, could raise prices if that leads refineries to produce more heating oil than diesel fuel. "The primary problem (for diesel prices this year) is the weather more than the impact of war from Iraq," suggests Labbe, who heads up in his own firm in Ormond Beach, Fla.

Kloza, on the other hand, believes that a shortage of U.S. refineries capable of producing certain petroleum products will have the biggest impact on diesel prices this decade. Indeed, he cautions that shippers and carriers can expect much higher prices in 2006, when the government mandate requiring trucks to use low-sulfur diesel fuel goes into effect. "The price (of diesel) will stay high irrespective of what happens in Iraq," he says.

Another expected consequence of a war with Iraq is a shortage of transportation capacity and a resulting increase in rates as the military draws upon commercial resources to supply troops in the field. But that, too, may not come to pass.

To ensure an adequate supply of airlift, the federal government established the Civilian Reserve Air Fleet (CRAF), a program first used during the last Gulf War. CRAF allows the military to use commercial jets to fly personnel and equipment, even if those aircraft must be modified to accommodate military needs.

The bulk of U.S. war materials (by one estimate as much as 95 percent) moves by ship. The federal government in 1997 set up the Voluntary Intermodal Sealift Agreement (VISA). That program allows the government to commandeer vessel space in a conflict. In exchange, ocean carriers that sign up for VISA receive preferential treatment on peacetime defense department contracts. At present, VISA encompasses some 120 ships. The program also covers intermodal moves; containers are loaded at military bases and taken by rail to ports, where they're placed on waiting vessels. "We hold ourselves out to spot a container and we move it to a destination (overseas), and they (the military) offload it," says Ken Gaulden, a senior vice president of marketing and government relations at Maersk Line Ltd., the U.S.-flag subsidiary of Denmark's A.P. Moller Group.

Because the VISA program would shift commercial capacity to the military, there is some potential for service disruptions. "As ships are taken out of commercial service, there is less space available (to shippers)," notes J. Douglas Coates, a consultant with Manalytics International in San Francisco. Gaulden, though, expects that won't be a major issue, because VISA lets the government procure intermodal capacity and sealift in phases. "It's an elaborate activation process that's designed to minimize the disruption to the commercial process," he says.

Individuals who are familiar with military logistics also are downplaying the likelihood of any significant impact on commercial transportation service or rates. For starters, they don't see the government placing much demand on CRAF or VISA participants unless a war with Iraq becomes a prolonged conflict. That's because this time around, the military is expected to deploy far less equipment and personnel than it did in the previous war with Iraq. In the last conflict, the United States and its allies had to build up enough forces and supplies to support ousting the Iraqi Army from Kuwait while taking steps to prevent an invasion of other Middle Eastern countries, such as Saudi Arabia. "It won't be as massive a buildup as the first time. The enemy then was 150,000 [soldiers]. We had to rapidly get our forces over there," says Gen. Gus Pagonis, who oversaw logistics during the Desert Storm and Desert Shield campaigns.

Now a vice president of supply chain management at Sears, Roebuck & Co. and president of its Sears Logistics Services unit, Pagonis says that because the U.S. military has studied the lessons of the past conflict, it has a better understanding of the logistical requirements for supporting troops in that part of the world. For instance, during the last Iraqi war, Pagonis had at his disposal only four "prepositioned" ships—vessels filled with military equipment that function like "warehouses on the water," he says. Today, the government has more prepositioned ships, thus reducing the need for VISA capacity.

Given the likelihood of a short conflict, then, there should be little military demand for commercial ocean and air cargo capacity, says Ken Beeks, a vice president with Washington, D.C-based Business Executives for National Security. "There will be short-term episodic stresses on airlift, and maybe some short-term episodic demands on the part of the civilian fleet contracted (under VISA)," he predicts.

Although a war is unlikely to affect oil prices or transportation costs for very long, another issue could significantly disrupt distribution: security. "When we went to war against Iraq before, it didn't have much of an impact," notes Kathy Luhn, a vice president with the National Industrial Transportation League in Arlington, Va. "Now, after the terrorist attack, the government is much more security conscious."

Heightened security concerns could lead the government to exercise a little-known provision in the Homeland Security Act. Under that law, the President may appoint an undersecretary of the Department of Homeland Security, who would act as a transportation "czar" with wartime powers to rewrite the nation's transportation laws.

"Basically, the undersecretary can issue again, in an 'emergency' situation, any rule or regulation or rescind any existing rule without providing an opportunity for public notice or comment," says Cliff Harvison, president of the National Tank Truck Carriers Association in Alexandria, Va. The only check on that official's powers would be a Transportation Security Oversight Board established under that same law. The board would have 30 days to review and ratify or disapprove any regulation that the undersecretary proposed, Harvison notes.

For example, with a transportation czar in place, the government could impose the Transportation Security Administration's proposal that motor carriers and shippers be required to install locks on all trailers and storage areas. The trucking industry has already raised the issue of the cost of equipping every truck in the nation with a lock, but those objections could be ignored under the law's emergency provision.

Airfreight forwarders and expedited carriers also face the prospect of new restrictions. Today, they move about 40 percent of their cargo in the bellies of passenger planes. In time of war, that practice could be stopped, just as it was after the terrorist attacks on Sept. 11, 2001, frets David Wirsing, executive director of the Airforwarders Association in Washington, D.C. "...(T)he U.S. government forced an embargo on the carriage of cargo in passenger airlines," he says. "I would hate to see that happen again, but I think that's a possibility."

Ocean shipments also could be subject to more scrutiny in a wartime environment. A recent report by the General Accounting Office raised red flags about the security of U.S. ports. "People need to give some attention to vulnerability as it relates to container handling and inbound movements," says Roger W. Kallock, a logistics consultant and former deputy undersecretary for defense. "We're spending billions on air transportation security and we're giving no attention to surface transportation."

Although the government might not go so far as to install a transportation czar during a short conflict, many industry observers expect the government will use a war to justify the rapid implementation of new security measures. That could lead to logjams in the national transportation system. "If we go to war, we would have to tighten security even more than we did last year," says Peter Stone of the Stamford, Conn.-based consulting firm Reebie Associates. "It means time delays at whatever bottlenecks appear and then the added expense [of resolving those roadblocks]."

In short, the lasting effects on transportation of a conflict with Iraq probably will stem not from the usual problems of rising fuel prices, tighter capacity and higher freight rates, but rather from the accelerated adoption of security programs that already were being developed due to the war against terrorism.

Pagonis says that everyone will have to learn to live with the inconveniences that inevitably will arise from additional security measures. The restrictions of Sept. 11 are now a way of life, and those restrictions are bound to get tighter, he points out. "We're just going to have a little inconvenience and [that will] just have to be accepted."