What’s Up (or Down) With Oil Prices?

Oct 27th, 2014 | Posted by

A few years ago it looked likely that we could see oil at $200 a barrel in 2015. Today, prices are rapidly falling, with Goldman Sachs now predicting oil will crash to $70/bbl in 2015.

What’s going on? Are we out of the woods of high oil prices?

Hardly. This is a temporary respite that, as I’ll explain, actually reinforces the long-term trend of rising oil prices.

Earlier this year reports indicated that the USA would overtake Saudi Arabia as the world’s largest oil producer, thanks to shale oil production in places like North Dakota’s Bakken formation. The result is that the world is awash in oil, almost glutted with oil. That new production was driven by visions of $200/bbl oil. But suddenly things look less promising at $70/bbl, a price at which the expensive process of shale oil production looks a lot less desirable.

The Saudis reacted by massively increasing production in order to bring down prices. The Saudis are the only oil producer with the ability to quickly and easily increase production, as they’re still pumping crude, rather than trying to extract shale.

The effect is to drain the pool so others are forced to get out. With a low price of oil, shale and other producers are driven out of business, just as happened in the 1980s in Texas. The Saudis can also put the screws to geopolitical rivals in Russia and Iran. It’s win-win.

It’s a win-win for the Saudis, of course, as long as they eventually bring the price of oil back up. And that’s exactly what they’re planning to do:

The decline in oil prices may continue for a year or so but will prove temporary as population growth spurs higher consumption and supports prices in the longer term, a leading Saudi petrochemicals executive said on Sunday.

He’s signaling that the Saudis are going to go back to a higher oil price once they’ve succeeded in driving other producers out. That’s the thing about crude production, it’s easily scaled down and up as needed. But if shale operations stop, they’re a lot harder to resume. There’s a longer lead time and a higher cost.

Saudi Arabia has been rumored to be at or past peak oil production for a few years now. They still have enough oil that they can increase production to drive down prices when it’s useful for them to do so. But that comes at the expense of future oil production. More oil today means less oil tomorrow.

In other words, don’t get used to this “temporary” decline in oil prices. By the spring of 2016 we may well see rising prices again. And because producers will have been driven out of the market, because the Saudis are moving future production to the present, and because all the other long-term factors driving peak oil remain in place, such as the decline in North Sea production, we can expect the next rise to be sharper and higher than what we’ve seen since 2008.

This all feels a lot like 1998-99, when the price of oil crashed to almost $15/bbl. But by the spring of 2000 oil prices had begun to soar. The cost of a barrel had tripled to $48/bbl. California gas stations saw their first $2 gallon gas. At the time, $2 a gallon felt like the end of the world – or at least like a major crisis.

But as the chart below shows, 1999 was a turning point. Ever since, the price of oil has been on a steady rise. Sometimes the rise accelerates dramatically, as happened in 2008. Sometimes the price crashes, as happened in 2001, 2009, and now in 2014. But those crashes are always temporary and the long-term rise always resumes in short order.

Macrotrends.org_Crude_Oil_Price_History_Chart

In fact, looking at that chart, you can see that the current price of oil is the same as it was in 2006, when gas first broke $3 at the pump, bursting the housing bubble and causing the long recession. So the price of oil right now certainly isn’t “cheap” by any means.

So enjoy the cheaper gas while you can. It won’t last, it never does. Let’s be thankful that California, at least, continues to move ahead with building alternatives to oil, like high speed rail. The case for HSR remains strong, regardless of the short-term behavior of the oil markets.

  1. Derek
    Oct 27th, 2014 at 11:19
    #1

    Is now a good time to make the highway trust fund solvent again?

    Reality Check Reply:

    Should be a good opportunity to increase gas taxes.

    But VMT-based tax (and insurance) is really what’s needed as MPG keeps rising along with the number of hybrids and electrics on the road.

    Eric Reply:

    Actually, oil prices will soon drop even more, once solar becomes cost-competitive.
    http://blog.greenwizard.com/wp/2011/11/rising-solars-falling-prices/

    Eric Reply:

    Ignore my previous comment, it was supposed to go on its own thread.

    But about gas taxes, they are better than VMT taxes, because for a given amount of overall tax revenue, you want there to be a financial incentive for people to use less gas. Plus, they are cheaper to administer.

    MarkB Reply:

    There’s no technical reason a VMT has to be a flat rate. Make the rate proportional to vehicle weight or fuel economy or whatever other factors you choose. Of course the politics would be messy, but VMT politics are messy to begin with, so why not go all in?

    Alon Levy Reply:

    A vkm tax that’s proportional to fuel consumption is a fuel tax.

    MarkB Reply:

    You missed the point of my comment.

    Derek Reply:

    There should also be a financial incentive for people to avoid driving during rush hour, because rush hour traffic is what drives costly highway expansion projects.

    Reality Check Reply:

    Congestion serves that role today with the cost measured in increased travel time & frustration. Highway expansions are just costly ways to (temporarily) remove or at least ease the peak-period disincentive — often only moving the pain downstream by delivering more traffic faster to the next bottleneck.

    Derek Reply:

    If congestion served the role of encouraging people to avoid driving during rush hour, there wouldn’t be congestion during rush hour.

    “Nobody drives on the freeway during rush hour anymore. It’s too congested.” –Yogi Berra

    adirondacker12800 Reply:

    It’s 11 bucks to cross the Hudson from New Jersey to Manhattan during peak. I suppose that means the hour long delays that frequently happen are all just in our collective imaginations. Apparently it’s eleven and half pounds to drive in London’s congestion zone. Google says that’s $18.54. How high do the tolls have to be to reduce peak demand?

    Derek Reply:

    Higher than they are now, unless demand to drive across that bridge during rush hour is perfectly inelastic unlike food and everything else in real life.

    joe Reply:

    Rationing a resource by charging time as in spent in traffic is market driven solution. It is equitable since we all have the same limited amount of time.

    Derek Reply:

    Tell that to a mother driving a sick child to the hospital through rush hour traffic.

    adirondacker12800 Reply:

    Very very few people experiencing an emergency in New Jersey get the urge to go to a hospital in Manhattan. It’s mostly people who are too stupid to get on a train.

    Eric Reply:

    derek also makes a great point here…congestion dramatically impacts emergency services. The solution cannot just be to just let the roads girdlock themselves. At that point house fires will burn down the town.

    Reality Check Reply:

    Evidently all those people who are heard to say they leave home/work early “to beat the traffic” don’t exist. Congestion is still there, yes, but even more people would travel at peak periods without it.

    Derek Reply:

    The presence of congestion is not enough of an incentive to avoid driving during rush hour, not enough to “[serve] the role” (your words) of eliminating the need to widen freeways to eliminate congestion. No, a financial incentive is needed for that purpose.

    Oliver Wendell Holmes Reply:

    There is no “need” to widen freeways. If you just don’t widen them, people will figure out ways to drive at other times, take other modes, use other routes, accomplish the task without traveling (e.g. shop online, teleconference), or go somewhere else. Over the long run, effects like households and/or industries relocating to other parts of the metro area or even other metro areas. Or the last alternative, which millions of people seem OK with, is to just drive in congestion and put up with it.

    Congestion is not that bad, really.

    synonymouse Reply:

    Tell it to Barbara Boxer, who always manages to get funding for more lanes in Marin.

    Derek Reply:

    People use congestion to justify widening freeways. It happens over and over again.

    Eric Reply:

    the tele-work argument for congestion mitigation always strikes me as just stupid. the only people it applies to are office workers, whose employers have money to spare. retail, manufacturing, medical, service, etc, there are far more jobs that cannot be done from home than jobs that can.

    also the argument planners always make when they make “mixed use” developments…as if an office complex and strip shopping plaza are the reason people decide to choose where they live…schools are the primary factors, after that, probably housing values (crime, tax structures, etc)

    Eric Reply:

    Fewer people drive than would without congestion. Some people are more able than others to choose the time at which they travel; these people will be the first to retime their journeys to avoid traffic. If congestion disappears entirely, then these people will go back to driving in the peak time, until the equilibrium between congestion and travel flexibility is reached.

    This is the other side of the coin of “induced demand”.

    Reality Check Reply:

    What about all the people who are just too lazy/undisciplined to get up early to beat the traffic? I know a few people who are by choice early risers and almost never suffer in the traffic jams I’m too lazy to avoid. So while I could get up early to “beat the traffic”, I’m too lazy and instead make a game out of figuring out the fastest lane for each segment of my commute. I expect this is a huge segment of peak period drivers … they just like working the same popular “normal” (whatever that means) hours as most everyone else jamming the roads.

    joe Reply:

    I doubt it has to do with laziness. I assume most people have dependencies. For example Kid + School = rush hour commute. Also, most after school programs, public and private, end at 6PM.

    And starting early means you have to be let out early or WTF is that all about?

    Eric Reply:

    Those people are in the “less flexible” category too.

    Oliver Wendell Holmes Reply:

    But about gas taxes, they are better than VMT taxes, because for a given amount of overall tax revenue, you want there to be a financial incentive for people to use less gas.

    Ideal transportation tax(es) would do all of these things:
    1) Incentivize less use of gasoline
    2) Incentivize less use of any type of energy (because all energy use has environmental impacts)
    3) Incentivize less use of roadways, period (because roadways are expensive to maintain, and all roadway use results in runoff pollution and GHG-intensive roadway construction/maintenance)
    4) Incentivize less use of roadways during rush hour (because rush hour congestion slows people down at the most economically productive time of the day for people to be getting places)

    Gas taxes do 1) directly, and do 2-4) indirectly, as long as only gas-powered cars are in the picture. Once EV’s and other alt-energy cars enter the picture 2-4) are out the window. A VMT tax does 2-3) directly, 1) & 4) indirectly. VMT tax indexed by weight would get 1-3) directly. A VMT tax indexed by vehicle weight + rush hour congestion pricing is probably the optimal solution.

    adirondacker12800 Reply:

    Put an electric meter in the car. Voila you know how much electricity the car is using just like the meter in the gas pump knows how many gallons you are buying. You want to reduce traffic during rush hour there are simpler ways to make it costly than than a whiz bang GPS enabled VMT tag that tracks your every movement all the time.

    Nathanael Reply:

    It’s already illegal to tamper with the odometer; easy enough to make it illegal to tamper with the electric meter.

    adirondacker12800 Reply:

    It is illegal to tamper with electric meters.

    Oliver Wendell Holmes Reply:

    The intrusive aspect of VMT metering is a major roadblock to VMT taxation. An alternative would be to radically raise taxes on the purchase of vehicles. This would indirectly correlate with VMT, and also incentivize squeezing every last mile out of existing vehicles, which would be good because 1/3 of the total lifecycle pollution associated with automobiles comes from the manufacturing process.

    Reality Check Reply:

    VMT metering (merely accumulating miles traveled) — even using GPS — doesn’t have to be any more “intrusive” than an odometer.

    Richard Mlynarik Reply:

    Look, a solution!

    What was the problem again?

    Reality Check Reply:

    Good question! Shifting partially (or wholly) to VMT-based taxes instead of gas taxes because alt-fuel vehicles beat up and congest the roads just as much as gas/diesel-fueled ones do.

    So it’d be good to have a privacy-protecting, easy, tamper-proof way for the tax administrators/authorities to periodically — at least annually, as with today’s annual registration fee assessment — learn the VMT of any vehicle in order to verify and assess the correct payment due.

    Traditional mechanical odometers must be read visually. Privacy of where and when we travel is often raised as a concern in connection with electronic (e.g. GPS-based) VMT tracking. My point was that GPS-based VMT tracking need only accumulate mileage (not location history) … but then perhaps GPS isn’t even needed since mileage can be inferred odometer-style from wheel/axle revs …

    Reality Check Reply:

    Then again, location aware GPS-based charging could be used to implement time & congestion-based charges (i.e. rates could be varied in real-time based on factors such as congestion, speed, use of preferred/premium vs. secondary roads/routes, etc.). The gross vehicle weight and other factors could be thrown into the formula too.

    Germany’s Toll Collect does essentially this for trucks.

    Here’s a nice high-level summary overview:
    The German Federal Office for Goods Transport benefits from a tolling system relying on satellite navigation

    The challenge

    Historically, German motorways have been financed by a tax levied on car owners’ revenue. As of 1990, the German federal administration wished to reduce truck traffic on Federal motorways by implementing a tax targeting heavy vehicles (>12t). The aim of the initiative was not only to reduce congestion but also to limit the deterioration of roads. The tax would also start charging foreign trucks which previously circulated on federal roads without paying any fees.

    On 9 February 1994, Germany, The Netherlands, Belgium, Luxembourg and Denmark signed an agreement to introduce a common charge based on road usage time (the Eurovignette). As of 1999, the Ministry of Transport decided to replace it by a distance-related tolling system and launched a tender call to design, implement and manage it.

    The satellite solution

    In 2002, the contract to implement the tolling system in Germany was awarded to a consortium including Daimler Chrysler Services AG (now Daimler Financial Services AG), Deutsche Telekom AG and Cofiroute S. A., which created a dedicated society, Toll Collect. The tolling system became operational in January 2005.

    Trucks circulating in Federal motorways have been equipped with On-Board Units (OBU), containing truck identification data and a geo-positioning device which records the position and distance covered by the vehicles. The OBUs periodically download satellite time-stamped position, and then records trucks’ movements. Those signals are confirmed thanks to data generated by complementary on-board sensors so that the accuracy stands below 10 metres (which is crucial if toll roads are located close to free ones). The system automatically logs in when the truck takes off. Registered users do not need to communicate in advance their itineraries and are free to change them during their journey. The system automatically calculates the toll fees due by users. Alternative ways of payment are also available, according to chosen subscription terms (direct debit, card payment, etc.).

    The results

    The satellite-based tolling system entails time-savings (less paperwork to generate tolling bills) and more flexibility for the drivers. The toll network covers today about 12,500 km of highways (plus some federal roads) and includes 2,213 junctions. The system does not require any road-side equipment and enables a free-flow traffic on German motorways and federal roads. In contrast to conventional tolling systems, there is no need for vehicle speed restrictions, stops or special toll lanes

    During the first two years of implementation (2005/2006) only, the satellite-based tolling system generated revenues for €5,943 billion, which reached €35 billion in 2014. System operating costs are currently equivalent to around 10 % of revenues.

    About 158,000 transport and logistics companies from 41 countries and nearly 1 million vehicles are registered with Toll Collect. The revenues of the system are used to maintain the motorway network and to provide increasingly satisfying services to motorway users.

    adirondacker12800 Reply:

    paying at the pump is even less intrusive. And comes with it’s own enforcement mechanism. Don’t pay the tax you don’t get the fuel. Which makes it difficult to drive on the road making the odometer roll. Or get deliveries from the distributor.
    Explain to us why a 6,000 pound SUV should pay the same tax as an econobox gettting 50 MPG. Or how reading the odometer and charging more for the SUV is different than taxing the fuel.

    Reality Check Reply:

    Yes, paying at the pump (gas tax) is unintrusive and the easiest to implement, but doesn’t properly track or account for the non-linear increase in road wear/damage with increased vehicle weight. It also does not fairly handle the ever-increasing proportion of hybrid and alt-fuel vehicles. While technically complex and costly to implement, a GPS-based VMT system such as the one Germany uses for trucks allows for the most equitable and flexible charging policy possible.

    Alon Levy Reply:

    A road wear tax would only tax trucks and ignore cars, because of the fourth-power rule.

    adirondacker12800 Reply:

    Heavy cars get lousy gas mileage. Light cars get better gas mileage.

    Alon Levy Reply:

    Yes, but fuel consumption is (very roughly) proportional to weight, whereas road wear is proportional to the fourth power of axle load. A truck, consuming ten times as much fuel as a small car, causes 10,000 times the road wear.

    adirondacker12800 Reply:

    Which is why trucks pay all sorts of fees and taxes that cars don’t pay. It doesn’t cover all of the costs but trucks pay all sorts of stuff private passenger vehicles don’t. And contrary to what some libertarians might think commercial vehicles don’t have privacy concerns. Not if all the state is going to do is check the wheel odometer.

    Alon Levy Reply:

    Yes, that’s the point I’m making: a German-style system targets trucks specifically because to a good approximation, all vehicle-caused road wear (as opposed to weathering) is caused by trucks.

    Eric Reply:

    the better way to do this is to standardize the home power connection that recharges the automobiles, and collect the tax based on the amp-hours charging the batteries.

    Eric Reply:

    and yet strangely, the purpose of the motor fuel tax is not to disincentivize driving. It is to provide a source of revenue for the maintenance and construction of roads.

    adirondacker12800 Reply:

    If the fleet is getting 25 mpg and 40 cents of gas tax supports the roads when the fleet is getting 50 mpg 80 cents of gas tax will support the roads. Thomas Edison didn’t give electricity away for free. He and other inventors figured out a way to meter electricity just like the the pump at the gas station meters gasoline or diesel. Tax the electricity just like the fossil fuels are taxed.

    Eric Reply:

    Of course, electric meters are highly susceptible to tampering. Gasoline sales taxes, not so much.

    adirondacker12800 Reply:

    No more than the one on the side of your house.

    Nathanael Reply:

    Odometers are also highly susceptible to tampering…
    …but in practice, rarely tampered with.

    Eric Reply:

    Rarely?
    http://www.nhtsa.gov/Odometer-Fraud

    Eric Reply:

    the federal gas tax is like 18 or 19 cents per gallon. there are state and local taxes that push the total tax higher, but most of this is a result of congress not raising the federal tax in the first place.

    Reedman Reply:

    Gas prices will rise in California in 2015 as part of implementing the carbon tax. A typical estimate of the tax increase is 15 cents per gallon.

    Eric Reply:

    according to republican propaganda.

  2. Eric
    Oct 27th, 2014 at 11:45
    #2

    Actually, oil prices will soon drop even more, once solar becomes cost-competitive.
    http://blog.greenwizard.com/wp/2011/11/rising-solars-falling-prices/

  3. Paul Druce
    Oct 27th, 2014 at 14:06
    #3

    Demand isn’t inelastic. If oil prices rise, consumers will respond with greater efficiencies, foregoing consumption, and modal switches which will decrease demand until it reaches an equilibrium. $200/bbl is far above that equilibrium point and is not a sustainable figure (though it may certainly be a short term spike). If we see mass defections to electric vehicles and mass transit, pre-tax oil prices will drop and remain low because of the significantly reduced demand.

    jimsf Reply:

    With the recent drops Ill be sacing about 150 a month in cash that I can spend in some other part of the economy – food maybe.

  4. Loren Petrich
    Oct 27th, 2014 at 14:22
    #4

    This site is more up-to-date: Cleantech News — Solar, Wind, EV News (#1 Source) | CleanTechnica. Wind and solar energy are starting to win in pure economics.

    However, that won’t affect oil very much, because those technologies are mostly used for electricity generation, and not much oil is used for that. It’s mostly coal and natural gas for that.

    Eric Reply:

    Here is a graph of US oil usage:
    http://www.landandfreedom.org/news/images/usdemand.gif
    Most of the usage except for transportation can be replaced by electricity, i.e. solar.
    And if electric cars become cost-competitive, then transportation can be mostly replaced as well.
    The demand for oil is currently quite inflexible (you don’t suddenly stop driving to work if gas prices spike), so a significant decrease in demand can lead to a large decrease in prices.

    Alon Levy Reply:

    Electric generation is a very small share of this graph. I’m not sure where the industrial emissions are coming from, but the residential and commercial ones are for heating, which can’t easily be replaced with solar.

    Paul Druce Reply:

    Industrial petroleum use. Somewhat more than half of it really should be classified under transportation.

    Paul Druce Reply:

    I take that back actually. Thought that LPG was mostly used for transportation fuel, turns out that only 1% of it is used for that in the US and 90% is for chemical feedstocks.

    Nathanael Reply:

    In industrial uses only (excluding most road gasoline / diesel and most jet fuel)

    “Other” went up a lot prior to the 2000s, and is now going down. It’s the single largest industrial category most years, which is quite unhelpful in figuring out where the oil is going.

    Next after that is the LPG. I suspect there have been industrial shifts from “other” to LPG in the substitutable areas — where the industrial processes can use either oil or gas.

    This is followed by fuel oil. Fuel oil is obsolete and I’m surprised anyone still uses it, as it’s been terribly expensive for over 30 years.

    The next category is asphalt / road oil — this uses much more than I expected; twice as much oil is used for asphalt as for gasoline. I am no longer surprised that asphalt prices are going up.

    adirondacker12800 Reply:

    as a user of No. 2 Fuel oil it’s was cheaper than natural gas up until a few years ago and it bounces between being a little cheaper and little more expensive depending on the price of it and natural gas. It tracks the price of other distillates pretty closely. It tracks the price of diesel very closely since it’s diesel without the engine additives and taxes. No. 4 and No. 6. are almost always cheaper because it’s the crap leftover after they distill out the kerosene, gasoline and diesel. And it’s the stuff they can extract before they are left with asphalt and petroleum coke.

    Darrell Reply:

    Here’s a pie chart of U.S. oil use: http://4.bp.blogspot.com/-aKIHH-jX8ZU/U_Vib6Wz2bI/AAAAAAAABBE/eeJUN79Cay0/s1600/fuels-pie-2013-1600.jpg — about 7/8 is used for transportation fuel.

    With tax credits electric cars are cost-competitive today. Lease a Leaf for $300 per month and “fuel” it for $1 per “gallon”.

    Eric Reply:

    But the point is to be cost-competitive without tax credits, which are a form of subsidy. If there were mass adoption of electric cars, the subsidy would be unaffordable. But hopefully these subsidies will lead to enough of a critical mass that development will lead to truly cost-competitive electric cars. That is what seems to be happening with solar panels.

    Darrell Reply:

    Battery prices have already been falling significantly and are expected to continue down with manufacturing improvements driven by market demand — Google electric vehicle battery cost 2014.

    Eric Reply:

    The sooner the better.

    Nathanael Reply:

    If you drive 100,000 miles per year (and some people do), the Tesla Model S is already cost-competitive without tax credits.

    The Leaf is cost-competitive at significantly fewer miles per year, but with the short range, it’s hard to drive it enough miles per year, unless you have a very specific usage pattern.

  5. Useless
    Oct 27th, 2014 at 15:12
    #5

    There are two factors in the latest oil price drop.

    1. Chinese economy’s slowing down, thereby reducing oil demand.
    2. There is a US-Saudi agreement on starving ISIS of oil revenue.

    Eric Reply:

    I thought bombing ISIS’s refineries did that?

  6. Reality Check
    Oct 27th, 2014 at 16:36
    #6

    Caltrain Celebrates 10 Years of Baby Bullet Service; Looks To Future Growth and Meeting Commuter Needs; Announces Formation of Caltrain Commuter Coalition

    As Caltrain marks its 10th year of Baby Bullet service, major employers that have grown their companies along the Caltrain/101 corridor announced the formation of a new advocacy coalition that will work to support efforts to expand Caltrain capacity and service as the system struggles to meet the unprecedented ridership and financial demands it is facing.

    The Caltrain Commuter Coalition (C3) is being coordinated by the Bay Area Council (BAC), the Silicon Valley Leadership Group (SVLG) and the San Mateo County Economic Development Association (SAMCEDA) and includes participation from Bay Bio, Google, HP, LinkedIn, Oracle, Redwood City-San Mateo County Chamber of Commerce, San Francisco 49ers, San Francisco Chamber of Commerce, Stanford and other companies working to ensure that traffic congestion and limited public transportation capacity between San Francisco and San Jose does not limit the region’s ability to remain economically competitive.

    […]

    In the 10 years since the Baby Bullet trains were added to Caltrain’s schedule, average weekday ridership on the system has climbed from 23,947 passengers to more than 61,000 passengers — a staggering 150 percent increase.

    […]

    Eventually, additional improvements will provide riders with even more options, including the accommodation of statewide high-speed rail service on the corridor and the extension of the system to the Transbay Transit Center being constructed in downtown San Francisco.

    In 2012, Caltrain secured agreement from nine local, regional and state agencies to begin investment in the transition to electric trains. Completing the entire program of projects needed to maximize Caltrain service to commuters and businesses along the corridor will require a significant amount of additional local, state, regional and federal investment.

    To assist in that effort, leading businesses and organizations have formed the Caltrain Commuter Coalition to advocate for funding to meet Caltrain’s needs and priorities.

    “We’re here to help make sure Caltrain realizes its potential,” said Jim Wunderman, President of the BAC, which helped coordinate the formation of the Caltrain Commuter Coalition. “Today, traffic congestion on the Highway101 corridor is threatening to limit the ability of our communities to thrive. Transforming Caltrain into a system that can sustain the long-term economic growth of our region is an essential part of the solution and we’re committed to helping make it happen.”

    “Our members have been working to advance Caltrain improvements for years,” said Carl Guardino, President and CEO of SVLG. {[i]Specifically how (as compared to your endless SJ BART boosterism for nearly the last 20 years), Mr. Guardino? -RC]

    […]

    Clem Reply:

    Specifically how (as compared to your endless SJ BART boosterism for nearly the last 20 years), Mr. Guardino?

    Maybe this is just another form of eventual BART boosterism? The dotted line between the Millbrae tail tracks (actually in Burlingame, at MP 14.1) and Santa Clara (MP 44.6) is only 30 miles.

    Robert S. Allen Reply:

    Fund BART (as planned) from Berryessa to Santa Clara Caltrain/SJC. Make BART/Caltrain transfers as nearly seamless as possible at Santa Clara and at Berryessa. That would help Caltrain and BART jointly to serve the public well, pending an ultimate integrated 5-County rapid transit network.

    Jon Reply:

    Caltrain doesn’t go anywhere near Berryessa.

    Assuming you meant Millbrae and Santa Clara, yes, BART/Caltrain transfers should be seamless and timed at both stations. But if you do that, and also build the DTX to Transbay, what added value would there be to replacing Caltrain with BART? It would eliminate a transfer for passengers traveling from points south of Millbrae to any SF BART station outside of downtown, but it would add 15 minutes to the journey of every passenger traveling from points south of Millbrae to SF downtown. Given that the latter group of passengers far outnumber the former, replacing Caltrain with BART would provide negative value for a huge expense.

    Robert S. Allen Reply:

    Correction: Make BART/Caltrain transfers as nearly seamless as possible at Santa Clara and at Millbrae. Haste makes waste, and the hour was late. Sorry for the mis-statement.

    Jon Reply:

    That’s a minor point. The major point was why you think that adding 15 mins to the commute of everyone traveling between points south of Millbrae and downtown SF would be beneficial to the region.

  7. trentbridge
    Oct 27th, 2014 at 17:08
    #7

    How West Coast Liberal is this blog? All these posts and no-one has pointed out that the drop in gas prices and crude oil is an Obama-led plot to steal the mid-term elections from the Republicans and ensure that a socialist, Islamic state is established here. (Sarcasm, of course..)

    Seriously, Robert, trying to predict oil prices? Like anyone knows how much oil will be sucked out of North Dakota in the next five years..

    I’ll make a fearless prediction that the California drought will end this winter and that the very visible sign of how wet California has become will be – cows floating down the Sacramento River by March 15th 2015.

    Ted Judah Reply:

    I would add oil prices aren’t really falling–the dollar is getting stronger. It’s sort of like Dutch disease…the U.S. Produces more domestically so it buys less internationally. As less dollars are held in reserve, those that are appreciate in value.

    synonymouse Reply:

    You mean deflation?

  8. Reality Check
    Oct 27th, 2014 at 17:37
    #8

    Paul Krugman: Ideology and Investment

    America used to be a country that built for the future. Sometimes the government built directly: Public projects, from the Erie Canal to the Interstate Highway System, provided the backbone for economic growth. Sometimes it provided incentives to the private sector, like land grants to spur railroad construction. Either way, there was broad support for spending that would make us richer.

    But nowadays we simply won’t invest, even when the need is obvious and the timing couldn’t be better. And don’t tell me that the problem is “political dysfunction” or some other weasel phrase that diffuses the blame. Our inability to invest doesn’t reflect something wrong with “Washington”; it reflects the destructive ideology that has taken over the Republican Party.

    […]

    But once the G.O.P. took control of the House, any chance of more money for infrastructure vanished. Once in a while Republicans would talk about wanting to spend more, but they blocked every Obama administration initiative.

    And it’s all about ideology, an overwhelming hostility to government spending of any kind. This hostility began as an attack on social programs, especially those that aid the poor, but over time it has broadened into opposition to any kind of spending, no matter how necessary and no matter what the state of the economy.

    […]

    And the result, as I said, is that America has turned its back on its own history. We need public investment; at a time of very low interest rates, we could easily afford it. But build we won’t.

    Nathanael Reply:

    California should print its own money. Call it something else if you’re worried about the constitutional rules, filter it through a state-owned bank (like the Bank of North Dakota) to avoid trouble with the feds — but basically, California should print its own money and spend it on useful infrastructure.

    The federal government won’t do it. California can. California should.

    Paul Druce Reply:

    Playing word games doesn’t make something magically legal. California was skirting the line as it was with the IOUs it issued during the financial crisis; this would be slapped down long before a single bill was ever printed.

    Nathanael Reply:

    No, it wouldn’t; it would be affirmed as legal.

    “Legal” means next to nothing these days — look at the people held without trial at Guantanamo Bay, which is blatantly unconstitutional, yet it remains open.

    California is more powerful than the federal government. If California decided to issue money, nobody, and I mean nobody, would *dare* to stop it. Particularly since it would promptly revive the economy, and anyone trying to stop it would be the job-killing return of Herbert Hoover.

    Nathanael Reply:

    It would, of course, require a governor and legislature with some guts and some chutzpah.

    If Jerry Brown and both houses of the legislature backed a Bank of California money-printing plan, the federal courts would stay well away and the federal government wouldn’t want to be seen interfering in any way. The politics are very clear here.

    Paul Druce Reply:

    No, it wouldn’t; it would be affirmed as legal.

    No, it would not.

    California is more powerful than the federal government. If California decided to issue money, nobody, and I mean nobody, would *dare* to stop it. Particularly since it would promptly revive the economy, and anyone trying to stop it would be the job-killing return of Herbert Hoover.

    Oh please. You’d see Federal lawsuits, and injunctions, hitting the state so fast that they’d probably start appearing before the thought even entered into anyone’s mind to create such a thing, if for no reason other than the fact that it would be in the political interest of an awful lot of people to halt it.

  9. Jos Callinet
    Oct 27th, 2014 at 22:00
    #9

    At best, public Investment stands very little chance of happening any time soon in the United States. It will be virtually impossible if both the United States Senate and House of Representatives end up in Republican/Tea Party hands – very likely to happen because both President Obama’s AND the current Congress’ public-approval ratings are in the sub-basement. Voters are ITCHING to toss out the current crop of highly unpopular members of Congress.

    Jos Callinet Reply:

    So, we can kiss the Senate Democratic majority good-bye.

    joe Reply:

    HSR Fed funds run into the fiscal end of 2017, 9/30/17.

    That means the 2016 election, presidential year, will determine if HSR continues unabated.

    joe Reply:

    Rail requires high-speed spending
    The state would have to pull off a $6-billion feat in 5 years or risk losing federal funds for the bullet train.
    May 14, 2012|Ralph Vartabedian

    The bullet train track through the Central Valley would cost $6 billion and have to be completed by September 2017, or else potentially lose some of its federal funding. It would mean spending as much as $3.5 million every calendar day, holidays and weekends included — the fastest rate of transportation construction known in U.S. history, according to industry and academic experts.

    http://articles.latimes.com/2012/may/14/local/la-me-bullet-risks-20120514

    synonymouse Reply:

    Piece of Cake

    When it comes to throwing money away PB is champeen.

    synonymouse Reply:

    And if push comes to shove, California’s huge congressional delegation can cut a deal. I could foresee some monies being repurposed to BART, the machine’s most pampered pet.

    BART is unsurpassed in grabbing funding. To paraphrase Junior Soprano, better hold onto your privates when you’re dealing with BART.

    Eric Reply:

    and yet its republican senators causing all the problems. All of which are the result of changing the senate rules on filibustering. if those old geezers had to stand up there and talk the whole time they were filibustering something, we would not be in this mess.

    RESTORE THE FILIBUSTER!!!!!!!!!!!!!!!!!!!

  10. Robert S. Allen
    Oct 27th, 2014 at 22:49
    #10

    2008 Prop 1A was for “…Safe, Reliable…” High Speed Rail. HSR on Caltrain tracks – with their dozens of grade crossings and plethora of commute station – would be NEITHER SAFE NOR RELIABLE. HSR needs fenced and grade-separated track. Don’t squander HSR money to electrify and extend Caltrain to the mis-named Transbay Transit Center for track HSR cannot safely travel. End the first phase of HSR to the Bay Area at San Jose, with transfers there to Caltrain, Capitol Corridor, Amtrak, VTA rail, and SV-BART.

    Joey Reply:

    Oh, the horror

    J. Wong Reply:

    @Robert S. Allen

    Nothing says that the blended plan is permanent. HSR will _not_ ever run full speed on the Peninsula into SF blended or not.

    Also note that the Chinese had several accidents on their grade-separated HSR. So are you saying HSR cannot ever be SAFE or RELIABLE?

    Reality Check Reply:

    BART has suffered multiple derailments, suicides, employee deaths, rider assaults/killings, fires and other mishaps in/on/along their grade-separated ROW, trains and stations and parking lots … so does this mean BART “cannot ever be SAFE or RELIABLE”?

    Robert S. Allen Reply:

    Grade crossings are vulnerable to accidental or intentional vehicular stall across a railroad track. Even at 79 mph, a train hitting a heavy truck can be a disaster, as happened at Bourbonnais Illinois in 1999. Delays arise from reportable accidents, dare-devil acts, suicides, etc. HSR, to be “…Safe, Reliable…” per 2008 Prop 1A, needs a secure track, well fenced and grade separated.

    Caltrain has dozens of grade crossings and a plethora of trackside station platforms. Increasing the authorized speed on Caltrain from 79 mph to 125 mph as proposed violates the “…Safe. Reliable…” premise of Prop 1A. Hence the first phase of HSR to the Bay Area needs to stop at San Jose. Using HSR funds to electrify and extend Caltrain is inappropriate.

    joe Reply:

    HSR will not shut off cell phone service to prevent a PR disaster. BART has and asserts it can do so again at will.
    http://www.bart.gov/news/articles/2011/news20111201

    BART’s new cell phone policy sets a standard of “extraordinary circumstances” when cell phone service could be temporarily interrupted.

    And people commit suicide
    Suicide at Hayward Station Was Tuesday’s Second BART Fatality
    http://sfist.com/2013/06/19/suicide_at_hayward_bart_was_tuesday.php

    Also are shot by confused BART Cops.

  11. Donk
    Oct 28th, 2014 at 06:00
    #11

    Good article from Ralph, discussing whether politicians should get involved in the project or not:

    Bullet train just a blur in California governor’s race

    -Experts warn against California governor candidates’ lack of discussion about bullet train project
    -The lack of substantial dialogue about California’s bullet train project could have long-term consequences
    -The state rail authority owns only a fraction of the parcels it needs for the first 29 miles of construction

    Great quote:”The potential problems with the project have not been a focal point of Kashkari’s campaign either, although he has labeled the high-speed rail line a “crazy train.” In an interview, he said he hadn’t researched the project deeply and wasn’t familiar with many of the planning documents for the system.”

    http://www.latimes.com/local/politics/la-me-campaign-train-20141028-story.html#page=1

    joe Reply:

    Ralph’s OnIt. No mention of lawsuits delaying the project.

    Major construction was supposed to start at the end of 2012, but there have been a number of delays. One reason is that the rail authority owns only a fraction of the parcels it needs for the first 29 miles of construction.

    Governor Brown’s put in a better management team, politicked for it, added revenue by ballot initiative to fix state finances, appealed Kenny’s decision and fought for Cap and Trade.

    That’s how a political is involved.

    Kashkari’s been mum because he can’t win a factual debate. He has no alternative. This should a simple story: Kaskari’s a superficial, alternative free opponent.

    synonymouse Reply:

    The LA Times should talk as their articles are mostly devoid of any substantive technical information or expertise.

    Should politicians butt out? Hell no! Who is smarter: pols or PB? I doubt there is a politician with a pulse who would do something as stupid as BART broad gauge. (hint: PB is Bechtel)

    Besides with Prop 1a vacated everything about PB-LAHSR is the politix du jour.

    Brown is senile; his handlers are in control.

    Lawsuits, Joe? You ain’t seen nothing yet. PB was so afraid of the Tejon Ranch Co. they failed to perceive there are some serious ritchies up there in the Tehachapis. Wait til they discover Jerry is planning to cut up their properties.

    joe Reply:

    I drove home last night via I-5. Tejon Ranch Co. let me pass unabated.

    synonymouse Reply:

    The Division of Highways, aka the Highway Lobby, is one of the most potent forces in this country.

    Look at how they destroyed electric rail transit and ripped asunder pretty much every city, and particularly downtowns. The highway lobby is not afraid of the Tejon Ranch, unlike Jerry who has gotten timid around big money in old age.

    Besides how else are the idle rich going to access their digs in the TMV without I-5?

    adirondacker12800 Reply:

    helicopters
    black ones.

  12. Reedman
    Oct 28th, 2014 at 09:13
    #12

    FYI, the NTSB has released it’s findings in five Metro-North train accidents in 2013-2014, including the large one (that killed 4, injured 70):

    http://www.sfgate.com/news/us/article/NTSB-issuing-likely-cause-of-deadly-NY-derailment-5851925.php

  13. Scramjett
    Oct 28th, 2014 at 11:52
    #13

    I, for one, would prefer taking an HSR train over driving (given the option) simply because taking a mode of transportation that kills 40,000 people every year (driving) is not appealing to me.

    Scramjett Reply:

    Sorry, forgot the other half of my point, which is that I would make that choice even if gas were $1/gal. It never will be again, buy my point is that due to the deadly nature of the automobile, I’d prefer HSR no matter how cheap gas is.

    J. Wong Reply:

    Even at $1/gal, it’s still 5 to 7 hours to L.A. Who wants to spend that long driving no matter how cheap it is?

    Scramjett Reply:

    That’s a good point. Also, even if the train takes 5 hours, it would be far more comfortable than being in a car for that long. And you don’t need to stop to use the bathroom.

    adirondacker12800 Reply:

    Improving it enough so that the train could make it in 5 hours costs almost as much as improving it so the train can make in under 3 hours. Keep it uncomplicated. 6 hours versus 3 hours. If you are on the train for 6 hours you have to pay for 6 hours of train expenses. If you are on the train for 3 hours you have to pay for three hours of train expenses.

    Lewellan Reply:

    My estimation of cost difference has always been the 5-hour trip cuts cost in half. Perhaps 6-hours is more accurate, but the LA-to-SF trip isn’t the only (nor largest) market demand the CAHSR line will serve; thus, the 2hr 40min mandate is a poor measurement of its intended service.

    Monday evening, the national public channel OPB aired “Brakeless,” an independent documentary film about the 2005 Japan Railway crash that killed 107 people; the inevitable result of always trying to travel faster.

    I thought it interesting that the Metrolink Antelope Valley line (link below) serves only 400 commuters daily. Yet Palmdale mayor threatens to close the Metrolink station because of homeless problems, while supporting Palmdale inclusion on the CAHSR route. What a mess.

    adirondacker12800 Reply:

    Building two track overpasses or underpasses costs the same amount of money whether it’s for 126 mph trains or 220 mph trains. You are pulling numbers out of your ass. 5 hour trip times means that people who don’t get a hard on when they see a train will use airplanes.

    Eric Reply:

    You’re aware that the 2005 Japanese crash was on a low speed commuter train, and Japanese HSR has never had a fatal accident? Sort of contradicts what you say about “the inevitable result of always trying to travel faster.”

    Max Wyss Reply:

    And, if we are talking of the same crash, it was operator-caused, because he did speed, and was way above the permitted speed limits. Reason: Pressure by management and social pressure to be on time.

    Per se, being on time is important, considering the high number of trains per hour and direction, but that never must infringe safety.

    So, absolutely no direct connection to HSR.

    Lewellan Reply:

    The more recent fatal crash in Spain was similar. Both were mid-speed ‘HSR’ systems of 125mph or so. Neither accident was solely driver error. Automated speed control systems could have prevented them, and perhaps the HSR accident in Germany too.

    With slower speeds, expensive viaduct construction is minimal, dacker. Expensive electrification too can be directed to where unavoidable (tunnels) and where it’ll do the most good(Peninsula/Altamont/Sacramento corridor). Any cost reduction builds support from those who think building on the cheap is the same as being fiscally conservative. Upgrade to total electrification eventually; then sell the affordable ‘dual-mode’ trainsets to another starter line – LAX to SLC?

    Peter Reply:

    No, the accident in Japan was a commuter train with a max speed of 125 km/h, not 125 mph. At the time of the accident the speed limit on the straight stretches of track nearby was 120 km/h, and the speed limit on the curved sections was 70 km/h.

    And how is a viaduct for a train with a low speed cheaper than a viaduct for a faster train? The same materials and construction methods are required for both.

    adirondacker12800 Reply:

    The deaths in Germany where caused by a bridge falling on the train. The people in the cars ahead of the bridge had minor injuries. No amount of signals or grade separation helps when a bridge falls on the train. If it hadn’t been grade separated there wouldn’t have been a bridge to fall on the train.

    Reality Check Reply:

    But the derailed train brought the bridge down onto itself:
    1998 Eschede ICE train derailment disaster

    The Eschede train disaster occurred on 3 June 1998, near the village of Eschede in the Celle district of Lower Saxony, Germany, when a high-speed train derailed and crashed into a road bridge. 101 people died and around 100 were injured. It remains the worst rail disaster in the history of the Federal Republic of Germany and the worst high speed rail disaster worldwide. The cause was a single fatigue crack in one wheel which, when it finally failed, caused the train to derail at a switch.

    […]

    About 130 kilometres (80 mi) and forty minutes away from Hamburg and six kilometres south of central Eschede, near Celle, the steel tire on a wheel on the third axle of the first car broke, peeled away from the wheel, and punctured the floor of the car, where it remained embedded.

    What ensued was a series of events that occurred within minutes yet took investigators months to reconstruct. The tire embedded in the rail car was seen by Jörg Dittmann, one of the passengers in Coach 1. The tire went through an armrest between where his wife and son sat. Dittmann took his wife and son out of the damaged coach and went to inform a conductor in the third coach. The conductor, who noticed vibrations in the train, told Dittmann that company policy required him to investigate the circumstances before pulling the emergency brake. The conductor took one minute to go to the site in Coach 1. According to Dittmann, the train had begun to sway from side to side by then. The conductor did not show a willingness to stop the train immediately at that point and wished to investigate the incident more thoroughly. The crash occurred just when Dittman was about to show the armrest puncture to the conductor.

    Derailment

    As the train passed over the first of two track switches, the embedded tire slammed against the guide rail of the switch, pulling it from the railway ties. This steering rail also penetrated the floor of the car, becoming embedded in the vehicle and lifting the axle carriage off the rails. At 10:59 local time, one of the now-derailed wheels struck the points lever of the second switch, changing its setting. The rear axles of car number 3 were switched onto a parallel track, and the entire car was thereby thrown into the piers supporting a 300-tonne roadway overpass, destroying them.

    Car number 4, likewise derailed by the violent deviation of car number 3 and still travelling at 200 kilometres per hour (125 mph), passed intact under the bridge and rolled onto the embankment immediately behind it. Two Deutsche Bahn railway workers who had been working near the bridge were killed instantly when the derailed car crushed them. The breaking of the car couplings caused the automatic emergency brakes to engage and the mostly undamaged first three cars came to a stop. The detached front power car came to a stop after passing the Eschede train station, three kilometers (two miles) farther along the track.

    Bridge collapse

    Coaches one and two cleared the bridge. Coach three hit the bridge, which began to collapse. Coach four cleared the bridge, moved away from the track, and hit a group of trees. The bridge pieces crushed the rear half of coach five. The restaurant coach, six, was crushed to a 15 cm (6 in) height. With the track now obstructed completely by the collapsed bridge, the remaining cars jackknifed into the rubble in a zig-zag pattern: Cars 7, the service car, the three first class cars numbered 10 to 12, and the rear power car all derailed and slammed into the pile. The resulting mess was likened to a partially collapsed folding ruler. An automobile was also found in the wreckage. It belonged to the two railway technicians and was probably parked on the bridge before the accident.

    […]

    adirondacker12800 Reply:

    Yes the derailed train rammed into the bridge supports and collapsed the bridge. How would a signal system help with supporting the bridge? The bridge has to be there to collapse onto the train. If it was a grade crossing the bridge wouldn’t have been there. It would not have collapsed onto the train, the train would have derailed and ground to a halt. Probably with minor injuries like the cars that didn’t get crushed by a bridge or the ones that rammed into the bridge.

    Reality Check Reply:

    Yes of course, Lewellan’s comment that “automated speed control systems” may have prevented Eschede is misinformed.

    Max Wyss Reply:

    One consequence of the Eschede accident is that on fast lines overpasses are now built with long spans, avoiding piers between the tracks. If piers are needed in slower speed sections, there are now concrete deviation elements which are supposed to protect the piers.

    And, as Reality Check and others say, no signalling system of any kind would have prevented that accident. Period.

    Lewellan Reply:

    Reality Checks, “how is a viaduct for a low-speed train cheaper than for a faster train? The same materials and construction methods are required for both,” isn’t correct. Mid-speed viaducts are commonly shorter and often unecessary. But who cares about facts? Just pull it out your butt and call it fact. Isn’t that how most of you guys here debate?

    Lewellan Reply:

    Perhaps, at a lower speed, the rail fracture derailment would’ve been less disastrous?
    No, let’s not debate that probability. Just kill the messenger every time. Amateurs.

    adirondacker12800 Reply:

    The cars buses and trucks that go under the tracks are shorter or the ones that go over the tracks are lighter when the trains go slower?

    EJ Reply:

    @Lewellan

    Kind of ironic you accusing people of pulling info out of their butt, when that’s all you do. You repeatedly assert that 1) building a 100-125 mph system is half the cost of a 220 mph system, and 2) a 5 hour trip from LA-SF is financially viable. You never present ANY actual evidence for either of these statements, and then when people try to patiently explain why you’re wrong you flip out and call everyone stupid.

    Max Wyss Reply:

    @Lewellan: how would you then explain the fact that the maximum speed on one of the longest railroad viaducts in Switzerland is 60 km/h? and that the maximum speed on the longest railroad viaduct in Switzerland is 80 km/h on one end and 110 km/h at the other?

    About the bridge pillar in Eschede, one could do some analysis at which speed it would not have been destroyed… my very rough guesstimate would be somewhere around 40 km/h … maybe.

  14. Lewellan
    Oct 28th, 2014 at 12:53
    #14

    Here’s a link to an interesting article about metrolink Lancaster:
    http://www.planetizen.com/node/71873

    I didn’t know this astounding demand to commute to LA was being so hampered.

  15. Edward
    Oct 28th, 2014 at 16:19
    #15

    And back to the subject at hand…

    Oil extraction from tight formations (those requiring fracking) drops in production rate much faster than conventional oil. That is, they become stripper wells. This is useful oil still, but to keep up production more fields will have to be developed.

    We have been blessed with a twenty year or so breather to get our act together. As the (somewhat) famous bumper sticker said,

    “Please God, give me one more oil boom. This time I promise not to piss it away.”

    I am reminded of two quotes. The first from Sheik Yamani, the former Saudi oil minister,

    “The Stone Age didn’t end because they ran out of stones.”

    And the head of the International Energy Agency, coincidentally and for totally unrelated reasons in my office, but not talking to me but to some Saudi officials,

    “Petroleum is such useful stuff. You can make plastics, medicines and all sorts of things out of it. And what do we do with most of it? We destroy it.”

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