Up by $31 in the last couple days according to the New York Times, currently at $122/bbl. Sure, crude prices have been coming down since their July peak, but as I explained last month the long-term trend remains upward for fundamental reasons, including peak oil and the global surge in oil demand.
Even if oil prices were to level off around $100/bbl high speed rail would be a good deal for Californians. But what this recently rally reminds us is that upward pressure is still there and the days of $100/bbl are probably over. We've seen 30% year over year increases in the price of oil since 2002. As we know, this has a dramatic ripple effect throughout our transportation system. The airline crisis is one of them, as higher fuel costs lead airlines to cut routes, flights, and raise fares.
The only way out of this is to build sustainable mass transit that is fast, reliable, and not dependent on oil. High speed rail meets all those needs. We've already waited long enough - time to get started by passing Prop 1A.
Monday, September 22, 2008
Oil Prices Soar
NOTE: We've moved! Visit us at the California High Speed Rail Blog.
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12 comments:
Why do you think rising fossil fuel prices disproportionately benefit HASR? Th is is just a question. Does it mean HSR can charge higher fares? Does it mean HSR cost per passenger mile falls relative to alternatives? Surely you understand that construction costs are inextricably tied to fossil fuels both construction and materials.
when the oil prices were dropping like a rock, not a word from Robert.
@ rob dawg -
the amount of energy consumed in the construction of the network is probably on the order of 6-12 months of operation near full capacity. Over the course of the lifespan of the system, its inherent energy efficiency will win hands down.
Also, note that runways and highways - especially those with asphalt surfaces - also consume large amounts of energy both during construction and operations.
@ anon @ 1:27pm -
you're looking at oil prices at a very short timescale, which makes no sense in the context of a very long term project like HSR. Let me try to explain that.
The driving force behind the recent wild gyrations of the price of oil appears to be plain old speculation. Stuck with a pile of illiquid mortgage based assets, investors have ploughed vast sums into commodity markets, especially oil. They recently had to pull that money back out to cover short positions and other hedges. Now, the US economy looks set to enter a full-blown recession which will depress demand for oil.
That is not to say that we'll see a return to $30 a barrel anytime soon - if ever. For one thing, emerging markets are generating real demand of their own. That will drop a little as US consumers buy fewer of their manufactured goods, but the global economy is no longer quite as dependent on the US as it once was.
For another, oil producing countries want to maximize their revenue, idling some production capacity if need be. Saudi Arabia is still best placed to do just that, giving the kingdom a chance to recover its traditional position of market maker. The existence of spare capacity will in and of itself bring down the speculative froth on the price of oil. The fact that Iraqi production hasn't recovered to pre-war levels yet will no longer matter as much.
Bottom line: as US financial markets recover from the present credit crunch, money will flow back into traditional loans to businesses and consumers. Oil prices should once again reflect - more or less - the balance of real-world supply and demand, at least for a number of years. On that timescale, global demand will be up and the supplies to meet them will be more expensive to come by.
Therefore, no-one should take a few years of oil at "just" $80-$120 a barrel as a sign that the US does not need to diversify the primary energy sources of its transportation sector. Grid-connected electric vehicles like trains are an obvious choice, hopefully augmented by battery-electric cars and bicycles.
Nonsense, anon. I cited in this post something I wrote in August explaining why we should keep the long view on gas prices in mind and not be fooled by a temporary fall. Try to keep up.
anonymous said...
when the oil prices were dropping like a rock, not a word from Robert.
Really? Wow. Robert was careful to say he was interested in a defensible assumption of rising energy prices. My question is different.
the amount of energy consumed in the construction of the network is probably on the order of 6-12 months of operation near full capacity.
Really, cite? You do know that the cost of concrete ties has quadrupled since the last CAHSR estimate of construction costs?
@Robert
You write:
Nonsense, anon. I cited in this post something I wrote in August explaining why we should keep the long view on gas prices in mind and not be fooled by a temporary fall. Try to keep up.
Then if your are only concerned about long term oil prices why do we have this very very short term headline.
OIL PRICES SOAR
If the price of oil drops $20.00 in next couple of days, is your new headline going to be?
Oil PRICES IN MAJOR DECLINE
I think not.
If all you can do is whine about post titles and not engage the actual argument or facts, then I'm chalking that up as a victory.
@rob dawg -
please don't confuse the amount of energy required during construction with the associated cost of raw materials.
From CHSRA's "Final Program EIR/EIS Report: Volume 1", Chapter 7.1.1
"[...] The HST Alternative would consume an estimated 19.1 million barrels of oil per year. The
proposed HST Alternative would consume an estimated 2.0 to 5.2 million fewer barrels of oil per year (a
22% difference) than the 2020 No Project baseline.
Operation of the proposed HST Alternative would potentially increase the load on the statewide electric
power system by an estimated 480 megawatts (MW) during the peak period in 2020. Overall, the HST
electricity demand would represent about 0.6% of an estimated 77,000 MW statewide demand in 2020.
During construction, energy consumption for the Modal Alternative is estimated to be about 241 million
British thermal units (MMBTUs) compared to an estimated 152 MMBTUs for construction of the proposed
HST system (37% less than the Modal Alternative)."
A barrel of oil of average composition contains approx. 5.8 million BTUs, so the system will consume approx. 19.1 * 5.8 = 111 MMBTU per year. Estimated energy consumption during the construction phase is therefore equivalent to 152 / 111 * 12 = 16 months of operations at full capacity.
Ok, so my guess of 6-12 months was too low, but I stand by my conclusion: over the lifetime of the system, the energy expended during construction represents a very small fraction.
Rummaging through a Google search, I ran across this bio of Kopp on Wikipedia and his involvement in High speed rail.
Currently he serves as the Chair of the California High Speed Rail Authority Board. As the Chairman, he is pushing an expensive routing that excludes the East Bay from direct access to California High Speed Rail. Together with Rod Diridon, Sr. and Carl Guardino, Quentin is helping push High-Speed Rail routing that favors San Jose, California interests over the larger interests of the San Francisco Bay Area. Quentin's favored route involves routing California High-Speed Rail south of San Jose, California to Gilroy, California over the Pacheco Pass (involving several tunnels of approximately 6 miles in length through uncertain geography). After an additional 100 miles of no appreciable human settlement, Highway 99 is reached. The alternative Altamont Pass route follows Interstate 580 freeway which goes through several large cities Pleasanton, California, Livermore, California, Tracy, California and Stockton, California and has no significant tunnels.
Nice description of the Pacheco route I would say. Amazing how Pacheco gets to be the route chosen.
There is obvious bias in that write-up. And that is what you get from volunteer contributors.
what i found hilarious is how everyone who said upward oil prices were speculation! speculation, i tell you! fell silent the moment that they dipped momentarily.
the thing that'll drive this point home about expensive oil being here to stay isn't high gas prices at the pump. when the gas shortages from the houston refineries shut down by hurricane ike start to spread from the inland south to the east coast, electric train travel will look like a brilliant idea.
insulating our economy from not only expensive gas but a future where it may not always be available when we need it is of the utmost importance.
@ rob,
If HSr is mainly competing with Road and Air alternatives, I think those both have more exposure to fossil fuels than HSR, which hopefully will be largely fueled by alternative energy.
On the road, non-fossil fuel alternatives may present themselves, but for air travel, there are alost no alternatives (though I think algae fuel is cool, it doesn't seem viable for mass production and cost effectiveness.)
Remember also that asphalt is largely composed of oil, so if you want to build more roads, the construction cost of the road will probably increase faster than that of rails, though I don't have numbers on that.
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