Volpe Center Report on Transportation in an Age of Volatile Oil Prices
The Volpe Center recently developed a critical report on the volatility of global oil prices and their effect on the national transportation enterprise for Paul Brubaker, Administrator of the Research and Innovative Technology Administration.
Oil prices have been highly volatile for the past three decades. Recently, however, they have been akin to a roller-coaster ride, nearly tripling from about $50 per barrel in early 2007 to nearly $140 per barrel in mid-July 2008 and back to around $45 per barrel by December 2008. Oil price forecasts show these wide variations for the near term as well.
The graph below shows oil price volatility since 2000 as well as projections of future prices through 2030. The Energy Information Administration (EIA) provides these projections of future prices, which vary significantly based on model assumptions.
OPEC and countries with national oil companies control most of the world's oil reserves. Given the political volatility of some of the oil-rich countries, many plausible scenarios exist in which civil or political unrest might seriously disrupt oil supply. America holds only about 2 percent of world oil reserves. All these issues factor into the EIA cases.
Over the past year, Americans have reacted to high fuel prices by driving less and using public transit more. Motor vehicle miles traveled appreciably declined after continuously increasing for nearly four decades. Additionally, logistic chains in most industries are being shortened and in some cases manufacturing facilities are being relocated back to the U.S. from abroad. Profits for freight modes decreased with higher fuel costs; as a result, nearly 1,000 trucking companies went bankrupt in the first quarter of 2008 alone.
The report developed by the Volpe Center is helping to shape discussion of the future of the transportation enterprise in the United States.
Sources: EIA, "World Crude Oil Prices: Weekly," August 28, 2008; EIA, Annual Energy Outlook 2008, June 2008; New York Mercantile Exchange, August 25, 2008; news reports on Goldman Sachs announcement, May 2008
