$100 oil would threaten airlines: IATA economist

Oil prices of 100 dollars a barrel or more are a possibility that would seriously threaten airlines, IATA chief economist Brian Pearce told AFP. "It is fear that takes fuel prices up. If there is a disaster in the Middle East and a real shortage of oil, then it is possible."

"A 70-dollar barrel has been sustainable so far because airlines cut costs and have considerably gained in efficiency," he said, adding that an increase of 30 dollars more would be tough for the industry to handle. "There is a danger if we saw another big hike of fuel prices, it could cause an economic slowdown and deprive airlines of strong traffic revenues" which help to offset higher fuel costs. "It will therefore represent a real danger for the aviation industry."

The IATA groups 265 airlines which represent 94 percent of international air traffic. It has calculated that the fuel bill for the air transport sector will amount to 112 billion dollars this year, or triple the figure in 2002. Fuel accounts for 26% of operating costs, the IATA says.

Follow-up to the Hirsch Report

energybulletin.net -> misi-net.com (pdf) :

The world is consuming more oil than it is finding, and at some point within the next decade or two, world production of conventional oil will likely peak. In addition to peaking, there are widespread concerns about the growing U.S. dependence on oil imports from both an energy security and a balance of payments standpoint. This study considered four options that the U.S. could implement for the massive physical mitigation of its dependence on imported oil:

* Vehicle fuel efficiency (VFE)
* Coal liquefaction (coal to liquids or CTL)
* Oil shale
* Enhanced oil recovery (EOR)

This study builds on one completed by the authors in 2005 which addressed the issue of world oil peaking. The current study deals exclusively with physical mitigation options for the U.S. Our analysis showed that the mitigation options that we considered can contribute significantly to the saving and production of U.S. liquid fuels, although decades will be needed for significant impact and related costs will be in the trillions of dollar range ...

High cost of oil could put many jobs at risk

peakoil.com -> usatoday.com :

The rising cost of oil has put a squeeze on the companies that use oil as an ingredient for their products. Chemicals made from oil are used by companies to manufacture many products consumers rely on every day, such as plastic bottles, aspirin, lipstick and deodorant. The direct impact on consumers has been minimal, because manufacturers, faced with strong global competition, are unable to pass along all of the added costs to customers. But the impact on manufacturers and other companies that use oil-based ingredients could be significant, causing a ripple effect throughout the economy. As firms are faced with rising prices and see their margins cut, they may have to cut back on production, or maybe even cut jobs or shut down. Wellman CEO Tom Duff says high oil prices are "an issue that extends beyond just the gas pump."

Continental Tire announced last month that 481 employees will lose their jobs July 7 when it will drastically reduce production at its plant in Charlotte, in part a response to higher raw material costs. The company has warned it may close the plant entirely. Tires are made with synthetic rubber produced with a chemical derived from oil. Approximately two-thirds of Goodyear's raw material costs are related to oil, spokeswoman Tricia Ingraham says. The company's raw materials prices nearly doubled from 2004 to 2005 to $5.6 billion.

Wachovia's Schenker says the squeeze on companies could become more severe if oil prices exceed $70 a barrel for a considerable period. Making matters worse, many companies are being hit with higher energy prices on a number of fronts. Not only are prices of oil-based goods increasing, but so are transportation costs and electricity prices.

Wellman's Duff warns that high energy costs will likely pose a challenge to companies for many years. And although consumers might not be paying now for the increased costs, they may end up paying for it later, in the form of lost jobs when companies start losing money and are forced to shut down, he says. "The consumer doesn't want to pay more for the end product," Duff says. "But at the end of the day, (the high cost of energy) gets pushed back to that consumer, whether they recognize it or not."

(2006-06-07 13:04:05 SGT) [Energy] Permalink

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