A fast track from oil dependence

The Spanish know how to get around in style and at speed. The country can boast it has the most comfortable, fastest and most frequent intercity travel service of any nation.

Where Japan has the highest patronage, Spain has speed; where the French have a comprehensive network, Spain has one longer.

Since its beginnings with the inauguration of the Madrid-Seville line, Spain has been building the world's most comprehensive high-speed rail (HSR) network per head of population. The system has evolved into the world's leading network and consists of an evolution of improvements that build upon the best of the French and German HSR networks.

The AVE HSR service is being progressively rolled out across the Iberian Peninsula. Spain now boasts over 2,900 kilometres of high speed railway which, within three years, will rise to 4,500 kilometres and be able to take a traveller to the four coasts of the Iberian peninsula from Madrid in under four hours.

The newly opened Madrid-Valencia high speed line, which has been operating since late 2010, has taken 83 per cent of the mode share from aircraft passengers in its corridor and more than three times as many by train than in the previous year.

The service, which takes just 90 minutes and averages 266 km/h, has a top speed of 310 km/h.

RENFE, the operator of the service, expects the proportion of travellers on the route choosing rail to grow further as they implement incremental operational improvements such as track and signalling improvements and a new ticketing system, offering advance discount tickets as airlines do today.

In the first 12 months of service over two million passengers travelled the 400 kilometres between the coastal city and Madrid.

Advanced plans

The main Spanish AVE track building program commenced in 2005 with a plan to build 10,000 kilometres of track and stations within 50km of over 90 per cent of the population.

Despite very difficult economic conditions following a huge property bubble which burst as part of the 2008 Global Financial Crisis, the previous centre-left Spanish government and subsequently, the newly elected right-wing government, are staying on track to complete the 1600 kilometres of projects that are well advanced at the beginning of 2012 (at the time of writing).

The plan behind the rollout is known as the Strategic Plan for Infrastructure and Transport (PEIT). Ratified in 2004, it includes $83 billion for HSR infrastructure as well as $10 billion for commuter services.

European-style person-centric urban planning is the norm in most Spanish cities, and this is combined with heavy use of public transport. They also have a push towards electrifying transport where it isn't already (high speed trains, tramways, metros, suburban lines and promotion of electric vehicles).

The issue of oil

Spain has already significantly decoupled from oil as can be seen by a comparison with Australia. Australia's per capita oil use is 46 per cent higher than Spain's – meaning the Spanish are already avoiding $23 billion per year (compared to the costs if they were as oil-intensive as Australia).

In the next two to three years it is likely that oil will strike $US200 a barrel and sustain that price level – a risk highlighted by the response of French bank Societe General to Iran's threats to close the Straits of Hormuz, and Bloomberg market analysis of call options on $US200/barrel.

Spain is still dependent on imports for over 98 per cent of its oil, and would have spent approximately $US50 billion on imports in both 2008 and 2011, when the average oil price for those years was $US100/barrel. As recently as five or six years ago, the idea of oil even reaching $US100/barrel for any amount of time was speculation, however, now it is the new norm.

The weak Spanish economy is in better shape because of its transport policies.

Over one third of the 2008 trade deficit, which ran at 10 per cent of GDP (approximately $140 billion), would have come from importing oil. This deficit would have been much worse if it wasn't for all Spain's metros, tram systems, light rail systems and high speed trains.

If $US200/barrel becomes the new normal, Spain's import bill will balloon to $100 billion. If they were as oil-intensive as Australia, it would approach $150 billion. This is comparable in magnitude to their 2011 budget deficit of over $110 billion which has recently made headlines, and will overwhelm their balance of trade.

Every investment that Spain makes in domestic rail infrastructure to offset vehicle petroleum consumption keeps money and jobs onshore instead of hemorrhaging dollars overseas, and creates a more resilient transport system. By putting in place the capital-intensive rail line infrastructure now, they now have massive capacity to expand the number of passengers it can cater for on its established routes at insignificant marginal cost.

For the highest usage AVE corridor, which at present is Madrid-Barcelona, much of the track is already dedicated solely to the route. If the patronage ever warrants it, the line could be expanded to carry as much as half a million passengers per 18 hour operating day.

Today, HSR has replaced almost 50 per cent of the passengers on what was the world's busiest air route, Madrid-Barcelona. To replace the planes entirely, the AVE service on the route only needs to cater for just on 16,000 passengers per day.

The world's most popular high speed line (which is longer than the Madrid-Barcelona line), Japan's Tkaid Shinkansen, already routinely carries half a million passengers in a day, with 3 minute service headways.

Another important factor in relation to HSR is induced demand. The Seville-Madrid line has demonstrated induced demand at 34 per cent of travellers that didn't exist prior to the lines existence. That means new opportunities for enterprise and trade are now available at each of the ports of arrival.

The demand is still increasing on the Barcelona-Madrid line. It is expected that induced demand could be as much as 1-2 million passengers per year - a huge boon to communities and businesses along the corridor.

Australia

In the case of Australia, which currently boasts rail services that routinely run at 30 km/h, if Australia matched Spain on a per capita basis today we would have 1340 kilometres of HSR.

This could link Newcastle-Sydney-Melbourne-Geelong-Ballarat, as well as another line Brisbane-Gold Coast-Byron Bay. By 2020, if we matched Spain's 10,000 kilometres, our network could cover Perth-Adelaide-Melbourne-Sydney-Brisbane to Townsville.

There'd also be no reason to stop there; beyond 2020 our major regional centres could be connected to the network.

Australia can roll out HSR cheaper as our corridors have less difficult terrain than in Spain and because track building, signalling systems, and catenary are all cheaper now due to advances in the industry. Trainsets are also cheaper, thanks to the Chinese and Spanish moving in on the French and German turf. Trainsets are 30 per cent more efficient per passenger kilometre than older models used on most existing lines, meaning costs are even lower now for operating high speed lines.

When the price of oil goes up and stays up, there will be an impact that is strongly felt in Australia, and in the US, who are already on 80 per cent oil imports (not including non-oil substitutes such as shale gas).

Australia currently imports 60 per cent of our oil, at a cost of over $23 billion in 2011. This is set to rise to 80 per cent by 2015, costing us over $30 billion at $100/bbl, or $60 billion at $200/bbl.

Spain, although doing it tough at the moment, is the country that is most prepared for this eventuality and when this happens, the Spanish economic situation will not look so dire when compared to its oil dependent OECD peers.

It takes time to plan, design and build a comprehensive high speed network, and for Australia that time starts now.