This is something of an addendum to yesterday's Ridership post, where I argued that fuel costs would be rising for some time to come, ensuring that HSR will have a high ridership, more than likely enough to "cover its costs" and generate a profit as is the case with the globe's other HSR lines. The International Energy Agency has revised its estimates of long-term oil supply dramatically downward:
For several years, the IEA has predicted that supplies of crude and other liquid fuels will arc gently upward to keep pace with rising demand, topping 116 million barrels a day by 2030, up from around 87 million barrels a day currently. Now, the agency is worried that aging oil fields and diminished investment mean that companies could struggle to surpass 100 million barrels a day over the next two decades.
The decision to rigorously survey supply -- instead of just demand, as in the past -- reflects an increasing fear within the agency and elsewhere that oil-producing regions aren't on track to meet future needs....
...But the IEA's pessimism over future supplies has been building for some time. Last summer, the agency warned that OPEC's spare capacity could shrink "to minimal levels by 2012." In November, it said its analysis of projects known to be in the works suggested that the world could face a shortfall by 2015 of as much as 12.5 million barrels a day, unless there was a sharp drop in expected demand.
Peak oil doesn't mean supplies will vanish overnight. But it does explain why oil is now above $135/bbl and rising fast. It explains that we have two futures - a future where we either reduce demand by providing alternatives like high speed rail, or where we don't build high speed rail and demand is reduced anyway as folks cannot afford the pay the sky-high fuel costs. Diesel is now over $5 here in Monterey - is $8 unleaded so far off?
It also is causing immediate crisis for the airlines. While the public freaks out about American Airlines' $15 checked bag fee, Merrill Lynch has more fundamental concerns:
"Frankly, we do not believe that the US airline industry can withstand $100+/barrel oil prices (see chart: NYMEX sweet crude oil) without major structural change," analysts at Merrill Lynch Airline Research said.
"Fuel is the highest single expense for Delta and Northwest, significantly eroding the financial benefits of restructuring and placing the airlines' new-found strength and stability at long-term risk," Delta Airlines said in a press release on the announcement of its intended merger with Northwest Airlines.
If oil supplies cannot increase to meet the demand, the price of fuel will rise and demand will have to come down. HSR deniers want to avoid this discussion like the plague, because it shows that if California is to remain competitive in the 21st century, it has no choice but to build high speed rail.