Oil price stabilisation?

Who would one year ago have thought that the oil price of 115 $/barrel, that we have today, was to be realised by a recent decrease of the price by 30% during the last month? The uncertainty of operating costs makes the budget process difficult for the bus operators.

The increased fuel price on one hand increases the interest for public transports as a relatively affordable way of travelling. On the other hand it decreases the operating margin for public transport providers. The fuel cost constitute 15% to 25% of the operating cost, with relatively large local differences.

Can the operators rely on future compensation for the increased costs?

In many parts of the world the balance between taxation and subsidies has been based on a more stable energy price development than we have today. In a recent analysis published in the Financial Times, the political considerations are analysed:


In areas with subsidised oil price the high cost for the public finances calls for reconsideration. And, in areas with high taxation, citizens expect the governments to compensate them. At the same time the public finances needs to be compensated by other sources. In a strained economy there are no good alternatives. For the national economy decreased imports, or for oil producers, increased exports drives more efficient transports. Buses constitute the most cost efficient men of person transports, beating the car by a factor of 10 and metro and train by a factor of 2.

Even if the demand increases, for the bus operators however the uncertainty is imperative.

About volvobuses

Adjunct Professor of Catalysis at Chalmers University of Technology. Lives in Gothenburg, Sweden, with my wife and three daughters born in 1991, 1994 and 1997. Is a passionate runner.
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