Investor Warren Buffett yesterday invested $26.6 billion in Burlington Northern Santa Fe, the second-largest U.S. railroad.  He particularly cited that fact that since deregulation, railroads have become a “decent business—and could be better over time.”  As the economy continues to recover, energy prices are forecast to rise.  The long-term outlook for crude oil remains volatile and uncertain.  But demand, especially in developing countries, is going up.  Between 2006 and 2030, liquid fuels demand is forecast to rise by over 25 percent (Table A5).  Non-OECD countries (particularly in Asia) will account for 96 percent of this increase.

Railroads, like highways, can be used to move freight and passengers.  As energy prices rise, the higher efficiency and lower per-mile energy use of trains will be advantageous in many instances, be they for moving soft drinks or daily commuters.  Even today’s network consumes 21 percent less energy per passenger-mile than automobiles.  Not only is the energy use lower, it can be from different sources.  For example, passengers riding on intercity trains that are powered by electricity in the Northeast consume zero petroleum (Preliminary National Rail Plan, p. 14).   Despite the high capital investment requirements, Mr. Buffet appears to recognize that rail offers some significant advantages over other forms of passenger and freight transport.

And energy use is not the only issue.  Since 1980, train-miles have increased by 27 percent while accidents per million train-miles have declined by 27 percent.  New technology to improve safety further, like positive train control (PTC) and electronically controlled pneumatic brakes (ECP brakes) continue their development.  High-speed rail services are also expected to expand.  And $8 billion in stimulus funds will be awarded this winter to various state applicants.  These have the potential to shorten trip times significantly for travelers and stimulate economic growth in the areas.

An improved railroad system can play an important role as part of a larger national strategy to reduce U.S. oil dependence.

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