Running on empty - transportation in Nova Scotia

The importance of transportation to Nova Scotia can be found in almost any set of provincial government statistics, from the tonnage of water-borne cargo to the number of tourists arriving by automobile, airplane, and cruise ship. The benefits of transportation manifest themselves in many different ways, from employment in transportation industries to the growth in service industries such as hotels and restaurants.

Prior to 2005, this view of Nova Scotia’s transportation systems would have changed little over the preceding decade, with, for the most part, steady growth in ground, air, and water transportation. Things changed dramatically in 2005, with the seemingly sudden and, to some, unexpected rise in the price of crude oil. After gradually falling to about $40/barrel by the end of 2004, crude oil prices began to increase steadily, reaching a high of $70/barrel in late August when hurricane Katrina hit the U.S. Gulf coast.

Concerns over the impact of rising energy prices on the transportation sector in the region were voiced this past November at a conference held in Truro. Air industry representatives explained that higher energy prices made low-cost airfares a recipe for bankruptcy, something experienced by a number of North American airlines in 2005. Similarly, some ferry operators stated that rising fuel costs were making marginal operations unprofitable, forcing them to reconsider their future. Actions by independent truckers over the summer highlighted the growing impact of fuel costs on razor-thin profit margins.

As we enter 2006, the price of energy and its impact on transportation will continue to be felt, given that supply is still having difficulties meeting demand. How long prices continue at these levels will depend upon a number of factors. For example, prices may fall because of heretofore unknown reserves being brought on-stream or new technologies miraculously boosting the output of fields that are experiencing declines. Alternatively, heavier, high-sulphur crudes, that are harder to refine, coupled with production struggling to keep up with growing world demand, will keep prices high.

Whether prices fall or stay high, the fact remains, oil is finite, and that the sooner we start developing alternatives to the ways in which people and goods are moved, the better prepared we will be to handle rising prices. At present, Nova Scotia’s transportation system depends upon cheap oil and, whether we like it or not, the days of cheap oil are rapidly disappearing.

Of the four principal modes of transportation, three (air, road, and water) require liquid fuels and, some argue, could continue to operate using biological fuels, such as biodiesel or ethanol. Whether this makes any sense economically (in most cases, the energy obtained from biological fuels barely exceeds the energy put into making the fuel) or environmentally (plans are underway to clear large tracts of rainforest to grow palm oil for the biofuel markets) is another matter altogether. Hydrogen and fuel cell technology are many years away from making significant inroads into the transportation sector.

The fourth transportation mode still available in parts of Nova Scotia is rail. Not only can rail be energy efficient, it is the one mode that, unlike the others, can operate using electricity. Since electricity can be generated from a variety of sources, from renewables to nuclear, the time has come for a rail renaissance. A well-run rail network can carry goods and people, efficiently and safely, reducing our dependence on costly, imported oil products.

Given its population, geographic size, and proximity to its major markets, Nova Scotia is particularly dependent upon transportation, meaning that the steady rise in oil prices has the potential to seriously damage the region's economy. By starting to lay the groundwork for a regional rail network, 2006 could be the year Nova Scotia starts getting back on the rails.

Published, Atlantic Business Journal, January 2006