Thought's on the industry.

[Topspin]

Just reading yet another post about how rising fuel prices guarantee that ticket prices must go up and got me thinking.
The median income where I live is routinely published around the 35K mark. However one would have to think that there are going to be substantially more people earning less than wealthy folks earning more, so I would think that the actual majority of folks would be earning closer to the 20K area.
Thus with an average family income of say 40K, by the time the government is done with it say 25-30K. When it is time to go visit grandma for her 70th birthday, how many are actually going to do it when the cost is 3-5% of their net income. It strikes me that the spending power of the average consumer is not what it once was hence ticket prices are driven down and LCC's prevail. Where this takes the industry as cost of living goes up, yet spending power remains the same I couldn't guess.
Note none of this is fact, just something I was thinking about.

[carholme]

Just talked to a friend of mine in the UK and he says that the low cost airlines have just raised their prices 10% to handle the immediate fuel costs.

carholme

[tonysoprano]

Easyjet showed a loss in the q1.....

[Topspin]

The point was as ticket prices climb, at some point supply will exceed demand, yet cost of oil will continue to climb.

[THEICEMAN]

Not so long ago, there was a huge discovery off the coast of Brazil. Extraction should start by the end of 2011. They are not sure how big the potential reserves are?
But there is a big problem, it's under 400M deep!
New technologies will be developped in order to suck out the oil....Some kind of coop between Chevron & Petrobas.

Given the production kicks in within the next years...the price of oil should start stabilizing. Hopefully, the new supply from Brazil kicks the price below 100$/barrel....hopefully???

This should be encouraging news for some airlines in the short run??????

http://www.cnn.com/2007/WORLD/americas/ ... index.html

[SQ]

as I said and Im gonna say it again, the next good place to work are all the middle east countries.
they will rule the world in 10 years, along with China.

USA are not the center of the world anymore, neither an oil producer.

[tonysoprano]

We had a recession in the eighties, one in the nineties. We had 9/11, Sars
and the "perfect storm" and now we might be headed for another recession, all in this new young century. Companies have come and gone. Many of us have survived all that and there's more to come. What I'm trying to say is get use to it. Learn to deal with it. The big picture is that if you really want to stay in the industry, no economic downturn will stop you. You will always be in demand.

[invertedattitude]

Headed towards a recession? Wake up the Americans are in one.

Canada is at the moment by no means as bad off as the Americans south of the border. People are staying in their homes, and still buying homes.

Fear mongering on CNN and the like makes us believe our economy is doing just as poorly. While it may not be doing stellar, our economic position north of the border is actually quite good in comparison to those in the states.

At some point the cost of Oil WILL come down, it's not a question of IF, it will... just a question of how long it's going to keep rising before it comes back down? Eventually people won't be buying as much oil, airlines going out of business, people buying Hybrid smart cars, saving electricity in their homes etc etc. The average amount of energy used will start coming way down, so in order to keep the oil flowing the oil gods (re: OPEC) will have to stabilize fuel prices before their own golden lined pockets start to slowly empty.

The best part of all of this is that there is no oil shortage, there never has been, oil prices ride only on speculation as mentioned on here. I'm not normally a conspiracy type, but if you could make billions just by inciting a little bit of fear in people through gullible news media and "Industry experts" wouldn't you?

[Topspin]

At some point the cost of Oil WILL come down, it's not a question of IF, it will... just a question of how long it's going to keep rising before it comes back down? Eventually people won't be buying as much oil, airlines going out of business, people buying Hybrid smart cars, saving electricity in their homes etc etc. The average amount of energy used will start coming way down, so in order to keep the oil flowing the oil gods (re: OPEC) will have to stabilize fuel prices before their own golden lined pockets start to slowly empty.

The best part of all of this is that there is no oil shortage, there never has been, oil prices ride only on speculation as mentioned on here. I'm not normally a conspiracy type, but if you could make billions just by inciting a little bit of fear in people through gullible news media and "Industry experts" wouldn't you?

You are absolutely correct; I.E. The Alberta Oilsands are projected to contain more crude oil than has been extracted to date, IF they can develop the technology to make it economically feasible. I agree we will not have to worry about running out of oil, at the very least not in our life times.
However does that necessarily mean the price will come down? I would think that the "money men" would recognize a good thing and do everything in their power to keep it that way. And if they don't whose to say the government of canada won't do it for them? I.E. the G.S.T. introduced 60 years ago to cover the cost of WWII is still in good standing 60 years later.
I am no economist, however I am skeptical of the cost coming down when it's forecasted to increase 100 some odd percent over the next year even though it has already done so in the last several.
And I am no alarmist, and not worried about the industry disappearing or massively downsizing. I just thought it was an interesting thought as it is going to be interesting to see where this goes.

[lilfssister]

That would be INCOME TAX and WW1 circa 1917.

http://www.collectionscanada.gc.ca/educ ... 402_e.html

The GST was introduced in 1991.

[short bus]

The gst was brought in around 90 or 91 if memory serves correct... are you talking about income tax possibly?

[Topspin]

Yup, my mistake.

[tsgas]

I.M.H.O. oil from the tar sands isn't going to get cheaper because of all the new government mandated regulations covering carbon capture.
Construction costs in Alberta have gone through the roof.
The Alberta gov has raised the royality rates.
Investors want to make their max R.O.I.
So all combined you better get used to oil at $100 a barrel plus.

[THEICEMAN]

I.M.H.O. oil from the tar sands isn't going to get cheaper because of all the new government mandated regulations covering carbon capture.
Construction costs in Alberta have gone through the roof.
The Alberta gov has raised the royality rates.
Investors want to make their max R.O.I.
So all combined you better get used to oil at $100 a barrel plus.

Why? Albertan loyalty rates have nothing to do with the world price of oil. It's a global market which revolves around the basics of Supply & Demand.

Correct me if I am wrong, but I thought the tar sands were still profitable to extract at 70$ a B? It may not be Arabian sweet oil, but it should be protifable in the 70-90$ range.

[fortis risk]

Its not the cost of producing the oil that sets the price, its a demand driven commodity. production hasn't been able to keep up to demand for some time. The problem is that even with new discoveries, such as the one off brazil, as China and India continue their economic growth as fueled by our consumerism they are starting to drive. This is a culture that relied on bicycles and beast. Now take a look at their population and imagine them driving at the same rate as north americans and any new discoveries will be swallowed in a gulp.

Sorry.

[flyin' fish]

There's plenty of oil in the world to meet demand for quite some time. Newfoundland continues to find new offshore oil fields and it has been said that Hibernia may be grossly underestimated (just one example). Lack of refineries is the problem. As for return on your investment...............didn't Exxon report something like 6 or 7 billion profit last quarter?? Chevron wasn't too shabby either.
This may be the time to see who will survive in the airline industry, but the industry itself will continue to grow in the long run.

[valvelifter]

I don't think the price of fuel will go down (except for small adjustments). The western countries are no longer #1 in terms of consumption. Whatever we save by buying hybrid, etc.. will be scooped up immediately by India, China, etc... People who never thought of ever owning a car in those countries are now in a position to do so, and the ones they buy will definitely not make it on the Consumer Reports' most fuel efficient cars list.

[Stoptheworld]

One thing that gives me some hope is that a lot of companies and nations are resurrecting the Fishcer-Troppe (forgive my spelling) process to produce synthetic fuel. Shell is building a plant in Qatar (where they have massive amounts of natural gas) to produce fuel that can be used in turbines. The process can be used to make synthetic gas and liquids from coal as well. Instead of using the cleanest, best fossil fuel that we have (natural gas) in abundance to extract the black sludge from the tarsands, wouldn't it be wiser to use it to supplement diesel and jet A?

http://en.wikipedia.org/wiki/Gas_to_liquids

[North Shore]

There's plenty of oil in the world to meet demand for quite some time. Newfoundland continues to find new offshore oil fields and it has been said that Hibernia may be grossly underestimated (just one example)

You are absolutely correct; I.E. The Alberta Oilsands are projected to contain more crude oil than has been extracted to date, IF they can develop the technology to make it economically feasible. I agree we will not have to worry about running out of oil, at the very least not in our life times

Not so long ago, there was a huge discovery off the coast of Brazil. Extraction should start by the end of 2011. They are not sure how big the potential reserves are?

It's not so much the amount that is left, but rather, the rate at which it can be produced. That, allied with ever-increasing demand, is conspiring to raise oil prices. At present, we use ~ 80 Million barrels a day - just under 1000bbl a second. Yes there's new discoveries, and lots of oil in the tarsands, but how fast can we bring those on line and to market? The tarsands, for example, have a huge reserve, but produce in the neighbourhood of 2 mill barrels a day (as an aside, ~ 50% of that goes to our friends the US in the event of an emergency, never mind our domestic needs) 2 million is a far cry from 80 million. As conventional oil fields in the North Sea, Alaska, Texas, Alberta and the Middle East dry up, then we will need to produce more and more from these ever rarer 'new finds' just to keep up to where we are now - never mind increasing production to meet new demands from the emerging economies in the Far East.

Call me a pessimist, but short of a drastic reduction in demand, I really don't think that we can keep up - and $200 isn't that far away....

The other factors in the tarsands are, of course, the massive amounts of energy (in the form of in-a-sense, more valuable natural gas) used to separate the bitumen from the sand and upgrade it to refinable oil, and the huge environmental toll being taken...

[2R]

What is the alternative ??The train ,the bus ,four days of driving ,birch bark canoe???
People in a big country will always have to fly cause walking is not an option

[Topspin]

What is the alternative ??The train ,the bus ,four days of driving ,birch bark canoe???
People in a big country will always have to fly cause walking is not an option

The problem though, is as oil costs go up, ticket prices have to as well. The cost of oil affects absolutely everything from the cost of hauling milk to the supermarket to the oil fired power plant that provides electricity to the computer chip factory. If it costs more for the economy to operate, then company's must cut cost, first place salaries & jobs, as a result purchasing power goes down.

If $200/bbl is on the horizon, when will we get to the point when only the extremely wealthy are able to afford to fly? If oil prices continue to climb at some point the average joe will not be able to afford it.

[Brint]

When oil hits $200 a barrel there is going to be more to worry about than the state of the airline business.

I just posted this site on another thread, I'm sure many have seen it before. Read it from top to bottom, a lot of the "but what about this" comments are addressed. Take it for what it's worth I guess:

http://www.lifeaftertheoilcrash.net/

[wallypilot]

Oil is headed up. Companies will adjust. Some may fold, others will prevail with more efficient technology. People will get out of their SUV's and into smaller, more fuel efficient vehicles. Automobile makers will learn how to make hybrids with better batteries, needing less fuel. Electric vehicles will increase in popularity and number. Biodiesel from reclaimed bio-oils will increase in use, to avoid supplanting food production. New oil reserves will be found, but not fast enough to stabilize prices, and petro-energy prices will increase steadily.

I think some parts of the economy are in trouble, for sure, though. RV's, for example, are going to be tough to justify for most people. Boats, sports cars, and airplanes won't be justifiable for most people. The world isn't ending in the way that article alarmingly claims. But it is changing, and for some folks there will be strong shocks, but for others new opportunity.

$200 per barrel is coming, probably by 2010, and $2/litre gasoline is coming as well. But even that price, for me personally, might increase my total cost of living by a couple thousand per year. I really don't think the sky is falling, but the times they are-a-changin'.

As for air travel, it's a part of every day life, and cycles have always existed, just the causes for those cycles change. There will be down cycles and up cycles. Learn to deal with it, make smart choices, and you'll do fine.

[Wacko]

[quote="wallypilot"][/quote]

This post and http://www.avcanada.ca/forums2/viewtopi ... 2&start=75 seam to be going in the same direction. Or maybe it's just me.

It is interesting though... at what point with the industrialized nations cross the line and either start securing oil reserves by force or try to pressure less developed countries to consume less. It's funny... recently there was a discussion on this forum about 2000 dollar cars from India. With the prices continuing to climb I think the target market will shift from India to the West.

What's happening in the world is actually a good thing. Airlines will be forced to think more economically. I don't remember if it was on AvCanada or some article I read but one thought that was tossed around was to have bigger aircraft towed to the runway in use by electric powered vehicles. I don't know how much that would save but every little bit helps I'm sure... likewise, there has to some talk about hybrid aircraft... flying at 40000 feet... I'm sure they could harness the suns energy to help with fuel economy? I doubt fully solar powered aircraft will hit mainstream any time soon.

... just thought of another thing... with airlines starting to charge for baggage and such... I wonder if the industry is going to shift toward single pilot flying with a computer in the right seat?

[North Shore]

I doubt fully solar powered aircraft will hit mainstream any time soon.

I can't see how they'd work at all, on the scale of today's commercial jets. I'd think that the energy collected from the solar cells on the top of the wings and fuselage would have to be equal to the amount liberated by burning x00 lbs of kerosene - I'm no physicist, but I'm sure that they are not even close...