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Airline Industry Doomed |
Current rating: 0 |
by Joe Futrelle
Email: futrelle (nospam) shout.net (verified) |
17 Nov 2004
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The airline industry is doomed. It depends on cheap oil, and cheap oil is about to run out forever, with most analysts agreeing that global oil production will peak within a decade, a period during which demand for oil is expected to grow at an unprecedented rate.
There is no propulsion technology suitable for commerical airlines that does not require petroleum-based fuel.
The global airline industry has not been profitable since 2000. It will not be profitable again unless the price of oil falls to about $35 a barrel, according to the International Air Transport Association.
Recent developments such as Delta's union accepting a 32.5% pay cut are signs of how desperate the economics are.
We are faced with a choice. Continue to subsidize the airline industry, in effect levying an airline tax, or switch to trains (also requiring considerable capital). The advantage of trains is that they can be powered with renewable energy. They also have the disadvantages that they are slower and can't cross oceans. Eventually, the economics will choose for us.
Rosy scenarios about discovering more oil have no data to support them. Oil discoveries peaked in the 1960's with annual new field discoveries dropping to zero in 2003. As a point of comparison, U.S. domestic oil discovery peaked around 1930 and domestic production peaked in the early 1970's. |
See also:
http://www.cnn.com/2004/TRAVEL/11/08/bt.iata.airlines.reut/
http://www.nytimes.com/2004/11/12/business/12delta.html
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This work is in the public domain |
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Re: Airline Industry Doomed |
by John Hilty
jhilty (nospam) shout.net (unverified) |
Current rating: 0
18 Nov 2004
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The world is definitely going to run out of oil (probably sooner rather than later), which will doom the airline industry. There is no doubt about this. Nor will the "market" be able to find a satisfactory substitute because the "market" cannot transcend the laws of physics, specifically the law of entropy, which states that over time energy becomes transformed from more usable forms into less usable forms (random dispersion).
Not only the airlines, but the age of global capitalism is drawing to a close -- the current industrial system cannot be sustained on a planet with finite resources. |
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Re: Airline Industry Doomed |
by Joe Futrelle
futrelle (nospam) shout.net (verified) |
Current rating: 0
18 Nov 2004
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We will not be out of oil within the decade.
Oil production will peak within a decade or so.
At that moment, there will be approximately as much oil in the ground as we have extracted in the entire history of oil drilling.
We will continue to pump that oil, but at a slower rate, since drilling new holes into dwindling oil fields will give us diminishing returns on our investment. This is exactly what happened to domestic oil production in the early 1970's.
But demand will not decrease.
The cost of meeting demand will begin to rise without end. Again, that's what happened with domestic oil production in the 1970's. Now it's happening on a global scale, and unlike then, when the US could import oil to keep the price down, there is no other planet the earth can import oil from.
Demand will drop, but that will be a symptom of the collapse of the global economy as business models predicated on cheap energy fail.
We will have to restructure our economy around other energy sources, but the energy required to do that will suddenly be so expensive as to amount to essentially an enormous tax on the global economy. All because we refused to amortize the cost before it was too late.
This is not a wacko theory. This is the application of simple economic theory to data. Everyone agrees the era of cheap oil is going to end, from environmentalists to oil companies to the Bush administration. Currently people are just arguing about whether it's going to happen in 2006 or 2025. |
