Former Shell Executive Predicts $5 Gas by 2012
A recent interview with a former Shell Oil executive has made waves this week, as John Hofmeister, president of the company from 2005 to 2009, predicted $5/gallon gas by 2012:
“When American consumers are short or prices are so high — $5 a gallon for gasoline, for example, by 2012 — that’s going to set a new tone. It’s going to be panic time on behalf of the politicians,” John Hofmeister, who was president of the company from 2005 to 2009, told Platts Energy Week. Platts Energy Week aired the interview with Hofmeister Sunday.
“What I fear the most is that by 2012, gas prices are so high that we have a backlash from the electorate and we go in reverse and we go back to a hydrocarbon-only type of a future, maybe with some nuclear, instead of moving on into the 21st century,” Hofmeister said.
By “backlash,” Hofmeister surely means an all-out effort to deny reality and avoid the inevitable truth that cheap oil is gone forever. When gas hit $4.50/gal in the summer of 2008, we saw proposals to “drill, baby, drill” off of nearly every coastline, as well as proposals to suspend the gas tax (because there’s such a huge difference between paying $4.82 a gallon and $5.00 a gallon). Thankfully those didn’t come to fruition, and instead Californians approved $10 billion in high speed rail funding and passed a series of tax increases to fund expanded passenger rail service.
Hofmeister’s suggestion is not idle speculation. Just before Christmas, oil prices broke $90/bbl for the first time since 2008. Prices at the pump here in California are well into the mid-$3 range ($3.45 at the nearby station here in Monterey). And this is all part of the long-term secular trend upward in oil prices that had Deutsche Bank predicting $175/bbl by 2016:
The implications for California are clear: we need to get ourselves off of oil. And that means we need to finish what we’ve begun and build out our local and intercity passenger rail networks, and preserve and expand our local bus systems as well.
Since the last gas price peak in 2008, we have seen a growth of HSR opposition around the state as a small group of ideologues, convinced that driving should be the only option available to Californians, have tried to destroy a train project that a clear majority of voters supported. I have previously argued that HSR opposition is a bubble phenomenon enabled by the temporary lull in the long-term rise in gas prices. As California prepares to begin construction on our HSR project, I have to imagine that HSR opposition will soon become very unpopular as gas prices continue to rise.
I’m sure some HSR opponents will claim that rising fuel prices will spur improvements and wider usage of hybrid and electric cars, rendering HSR unnecessary. I certainly hope the first part comes true – I’m all for more and better zero emissions vehicles. But that won’t impact our need for HSR.
First off, it doesn’t matter whether a car is fueled by electricity or by gasoline – it still takes a LOT longer to drive between NorCal and SoCal than it does to take a bullet train. So HSR will still have the automobile beat in terms of travel time as well as convenience, since you can’t work from your driver’s seat.
Second, electric vehicles in particular are best suited for short trips close to one’s home. While range improvements will surely happen, it’s not likely that we’ll see people driving 500 miles on a single charge anytime soon. Even if they could, you’re back at my first point – driving takes over twice as long as the train. In the meantime, though, it seems likely that even people who buy electric cars will still use the bullet train for longer-distance trips. This happens in Europe, where cars get much better mileage yet HSR is extremely popular.
Third, like the time problem, there is also a traffic problem that hybrids and electrics won’t solve. In fact, they might even make things worse, especially if the car-only fanatics get their way and all alternative forms of transportation are defunded. Already Southern California freeways are jampacked, as are many Bay Area freeways. As we know, the cost of building more lanes and roads to try and relieve the congestion is far greater than even the worst-case scenario cost estimates for the HSR project.
I hope that vehicles like the Nissan Leaf, the Chevy Volt, and the Tesla product line are spectacular successes. But they won’t change the need for high speed rail. California has to use less oil, and part of that means we’re going to drive less no matter what powers the car engine. (Especially since it’s quite unclear whether the electric grid can handle a mass switch to electric cars.) That’s OK. It’s not the end of the world. If you ask most Californians who are stuck in their cars for their commutes, they’d much rather have a more comfortable, affordable, and convenient method of getting around their cities, their metro areas, and their state.
Driving is always going to be part of California’s transportation system. But we are already on the path to developing the long-overdue alternatives that Californians want and need in order to enjoy 21st century prosperity. Rising gas prices will simply give a further kick to those efforts, while exposing HSR opponents as the reality-hating NIMBYs they always were.