GUWonder

The fairest way to handle the increased cost of fuel is to have the fares adjust in transparent manners. This surcharge nonsense is just that - namely, nonsense. It's one of the least fair ways to handle fuel price changes; it's amongst the least transparent ways for airlines to collect more revenue from passengers purchasing an airline's quoted fares. Less transparency in quoted fares is more fair? I don't think it is. And as a frequent flyer mile collector, I am certainly no fan of fuel surcharges -- since it is, in effect, a devalution of the miles.

biggestbopper

Actually, I know lots of people in L.A. who ride the MetroRail including a friend who takes it regualary downtown to the Courthouse and to the Opera in the evenings. Even yours truly rides it occasionally.

Problem with a lot of new transit construction is that the product is slow. When the new high speed subway was build under Paris thirty or so years ago one of the main design criteria was that it had to be lots faster than driving.

Unfortunately, most recent US porjects have ignored this aspect in favor of political routings or slower speeds to use old technology from favored suppliers, e.g., BART in Berkeley Oakland, the Chicago Expressway median strip trains and even the L.A. subway.

Anyhow, if oil keeps going up we will see problems far beyond how many miles does it take to get to Paris.

UnitedSkies

Well, AA reacted immediately by increasing domestic fares $5 one way/$10 roundtrip on Wednesday, April 19.

fastair

Nope...they did it last night, Tuesday, April 18.

tom911

..and we even have a thread devoted to just that topic started this morning:
AMR Raises Domestic Fares by $10

LLZ

that was posted at the onset of the thread.

Our electricity makeup is not heavily dependent on oil. Oil only accounts for 3% of our total electricity generation, as seen on the second chart here.

Coal is #1, followed by Nuclear, then Natural Gas, and even Hydroelectric generates more electricity than hydrocarbons. Now, these are "gummint" statistics again, but I seriously doubt they missed billions of barrels of oil powering the nation's electric utilities.

However, if you look at total Energy by fuel, then oil does come out numero uno, with the overhwelming majority of it going to power our automobiles which we're (myself included) all so fond of, and trucks, and airplanes, and providing all kinds of other carbon chains of varying lengths that end up in household goods, pharmaceuticals, feritlizers...you name it.

Bottom line is if automakers would increase MPG standards of all new cars and trucks by about 10 mpg, we could cut our oil imports by about 50% and still keep the lights and a/c on!

Of course, it will probably take the "gummint" to get GM and Ford to do what Toyota is already profitably doing to remain a viable business concern. I can't wait for their version of the "K" car

PresRDC

I can say with 100% certainty that both Boeing and Airbus (as well as the big three OEMs) have already begun the process of launching the NGSA. It is still a long ways away and the projects are just barely in the conceptual stage. Best guess for an EOS is around 2013.

ByrdluvsAWACO

Part of me thinks that Boeing will try to bring that down to 2012 just to trip up Airbus. By then Boeing will have 3 years of real world 787 experience to apply to the aircraft.

sipples

That's true, but energy sources are imperfect substitutes for each other. A higher price for one results in a higher price for another.

For example, natural gas prices have gone up right along with oil prices (more or less -- the general trend is the same). Natural gas prices influence electricity prices disproportionately. (Natural gas tends to be used for "peaker" plants, supplying electricity during periods of highest demand when electricity prices spike.)

In any event, airlines care about jet fuel prices which are heavily correlated to oil prices which, in turn, are correlated with general energy prices. And they're all going up.

By the way, oil is holding steady at or above $72/bbl in the latest trading as I write this. This $72 level is not a momentary intraday spike any more.

The last time oil prices hit these levels (on an inflation-adjusted basis) was in 1980 amidst the Iranian hostage crisis. The high prices cost a U.S. president his job and triggered a painful recession with high interest rates ("stagflation"). The airline and trucking industries, newly deregulated, had terrible problems. It's not clear whether these prices will cause the same problems, but the history is interesting.

mvoight

Yes, isn't it nice, only 111K per daily rider

gemac

Perhaps I was insufficiently clear in my post. The topic of that post was moving to alternate fuels. What I said was that we should use other energy sources to generate electricity and heat buildings. Using other forms of energy to power transportation is theoretically possible, but has a longer lead time and a larger investment in infrastructure than substituting other sources in applications that do not move. It would be useful if we did not use oil for applications that have other possible energy sources easily substitutable.

If oil prices remain high, it will not take government mandates to achieve higher mileage autos, people will buy them, and automakers will make them. In fact, they are already making them, but when gas was $2 per gallon, not everybody bought them. We have been through two sharp upward spikes in oil prices (and gasoline prices) in my memory - in 1973 and 1979. Both of these resulted in a shift toward higher fuel efficiency vehicles, and if this current upward move is sustained, I suspect it will as well. 1973 did not result in a recession, and 1979 did (well, not a recession but more a period of slow growth), but of course neither one resulted in the doomsday scenario described in post #17, and attributed to economists in the energy department. Each of the prior price spikes was an approximate doubling of the price of oil and gasoline, as would be a price of $100/bbl if we get there in the very near future. The lack of demise of the aircraft industry in these two prior instances makes me question the accuracy of such a forecast in this case.

Lest we veer too much off topic and into an Omni discussion, let's get back to talking about the air transport industry. What will be the effects on the industry if oil prices remain at or above current levels for the next 3-5 years? My guess is that such prices would have three effects:
1. Sharply increased losses for airlines in the very near term, as they have already sold a lot of seats at prices that did not contemplate these oil prices.
2. Moderately higher losses in the time frame from 6 months to two years, due to somewhat lesser demand as businesses and the public adjust to higher prices.
3. No effect after two years.
I would predict an acceleration of the move to more fuel efficient aircraft (this might be a good time to buy Boeing stock).
This could be enough to push one or two of the legacy carriers who are teetering on the edge of insolvency over that cliff.

sipples

Looks like it's holding higher again today, at $73/bbl according to Bloomberg. Maybe AA will need a "fuel surcharge" that adjusts upward every day.

On edit: I'd like to point out that Southwest Airlines now enjoys half priced fuel compared to other airlines. Half price!

Bear96

You are criticizing "gummint economists," yet don't believe that a 50% increase in price will have a significant impact on the number of buyers?

gemac

It is what is called "elasticity of demand." There is both a short-run elasticity of demand and a long-term elasticity of demand. I clearly stated that I thought that there was a reasonably high elasticity of demand in the short term, as the airlines have taught us that prices go up and down, and trained us to wait for the down movement when they go up. I said that I thought that in the long term, demand was pretty inelastic, as there were not economically competitive substitutes and people would adjust to higher prices and travel anyway.

I believe that your representation of my position is inaccurate and simplistic. My question is why you would want to do that?

sipples

Oil continues its upward march. It has now shot past $75/bbl.