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Ready For $262/Barrel Oil?  
User currently offlineKarlB737 From United States of America, joined Mar 2004, 3104 posts, RR: 10
Posted (8 years 7 months 3 days 6 hours ago) and read 3597 times:

Courtesy: CNN

Ready For $262/Barrel Oil?

http://money.cnn.com/2006/01/27/news...luggedin_fortune/index.htm?cnn=yes

37 replies: All unread, showing first 25:
 
User currently offlineTK787 From United States of America, joined Jan 2006, 4423 posts, RR: 12
Reply 1, posted (8 years 7 months 3 days 6 hours ago) and read 3567 times:

Time for hybrid jets?

User currently offlineDeltaGuy From , joined Dec 1969, posts, RR:
Reply 2, posted (8 years 7 months 3 days 6 hours ago) and read 3537 times:

I wouldn't take to heart just one man's opinion, but I wouldn't say it's not unrealistic to see a big spike if anything happens over in Iran or elsewhere. Either kill more of them, or get ourselves into a position to be less dependant on other nation is the only solution I can see.

DeltaGuy


User currently offlineA319XFW From , joined Dec 1969, posts, RR:
Reply 3, posted (8 years 7 months 3 days 6 hours ago) and read 3506 times:

I read on here:

http://news.bbc.co.uk/1/hi/business/4649580.stm

that according to estimates, Alberta has got the 2nd largest oil reserves in the world (after Saudi Arabia). It wasn't worth exploring this before due to the low price of oil, but now it's getting more and more worth it.
No doubt Dubya will want a piece of it! lol


User currently offlineN79969 From , joined Dec 1969, posts, RR:
Reply 4, posted (8 years 7 months 3 days 5 hours ago) and read 3437 times:

Without going into how realistic the scenario is, those prices would completely decimate civil aviation. Virtually all discretionary travel would cease, business travel would be limited to the barest minimum, numerous airlines would be shoved over the edge into collapse.

Actually most economies would ground to a halt if that were to occur.


User currently offlineStevenUhl777 From , joined Dec 1969, posts, RR:
Reply 5, posted (8 years 7 months 3 days 5 hours ago) and read 3425 times:

The $262/barrell is the worst case situation, if the Saudi government fell. The other six scenarios, if they happened, would take it to $115/barrel or so. Still, not very encouraging....

User currently offlineIowaman From United States of America, joined May 2004, 4390 posts, RR: 6
Reply 6, posted (8 years 7 months 3 days 5 hours ago) and read 3337 times:
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It simply wouldn't get that high. Just pure economics would either bring that price down or find something else cheaper. As said above as the price goes up it makes it more worth while to explore new oil fields and build new refineries as well as refurbish the current ones to make them more efficent.


Next flights: WN DSM-LAS-PHX, US PHX-SJD. Return: US SJD-PHX, WN PHX-MDW-DSM
User currently offlineN79969 From , joined Dec 1969, posts, RR:
Reply 7, posted (8 years 7 months 3 days 5 hours ago) and read 3319 times:

Quoting StevenUhl777 (Reply 5):
The $262/barrell is the worst case situation, if the Saudi government fell. The other six scenarios, if they happened, would take it to $115/barrel or so. Still, not very encouraging....

Even $115 would be like a "meteor strike" on the airline industry if it occured rapidly enough. Who would be left standing after the dust cleared? I think even financially healthy airlines would be hard pressed to survive at those prices.


User currently offlinePoitin From , joined Dec 1969, posts, RR:
Reply 8, posted (8 years 7 months 3 days 5 hours ago) and read 3302 times:

Quoting A319XFW (Reply 3):
I read on here:

http://news.bbc.co.uk/1/hi/business/4649580.stm

that according to estimates, Alberta has got the 2nd largest oil reserves in the world (after Saudi Arabia). It wasn't worth exploring this before due to the low price of oil, but now it's getting more and more worth it.
No doubt Dubya will want a piece of it! lol

As I understand it, the United States has the largest reserve of oil -- however it is shale oil (see http://en.wikipedia.org/wiki/Oil_shale ) and a bear to extract.

As for Alberta, I believe it is oil sand, much easier to extract, but still even larger than the Saudi oil reserves.

A $100 a barrel, I think you will see some major developement of these reserves, but we will all be freezing in the dark for several years until it comes on line.

Time to fill up my chain saw while I still can and go cut some firewood.

[Edited 2006-01-28 23:00:56]

User currently offlineDATAMINER From , joined Dec 1969, posts, RR:
Reply 9, posted (8 years 7 months 3 days 5 hours ago) and read 3302 times:

Quoting A319XFW (Reply 3):
Alberta has got the 2nd largest oil reserves in the world (after Saudi Arabia). It wasn't worth exploring this before due to the low price of oil, but now it's getting more and more worth it.

Oil sands more precisely, and as vast as it is it's very difficult to extract. Whereas a well in Saudi Arabia might need 1 part energy to extract 30 parts of oil energy, the ratio here is 1 to 1.5.


User currently offlineWidebody From Ireland, joined Aug 2000, 1152 posts, RR: 8
Reply 10, posted (8 years 7 months 3 days 3 hours ago) and read 3103 times:

I wouldn't think such prices would destroy civil aviation, I think a system would be put in place where pax will pay for the increases. Fares are decreasing every day, they can survive a substantial increase. It just means the pricing structure would have to be changed. Shortage would be a problem though.

User currently offlineOrion737 From , joined Dec 1969, posts, RR:
Reply 11, posted (8 years 7 months 3 days 3 hours ago) and read 3091 times:

Higher fuel prices, i hope, wont lead to airlines cutting back further service levels. I can envisage US airlines reducing food service to a single peanut per passenger, if oil prices rise.

User currently offlineAirPortugal310 From Palau, joined Apr 2004, 3619 posts, RR: 2
Reply 12, posted (8 years 7 months 3 days 3 hours ago) and read 3066 times:

Quoting Orion737 (Reply 11):
Higher fuel prices, i hope, wont lead to airlines cutting back further service levels. I can envisage US airlines reducing food service to a single peanut per passenger, if oil prices rise.

Wouldnt be surprised in the least.
Usually labor suffers first though....so expect the worst in that department.

Quoting Widebody (Reply 10):
I wouldn't think such prices would destroy civil aviation, I think a system would be put in place where pax will pay for the increases. Fares are decreasing every day, they can survive a substantial increase. It just means the pricing structure would have to be changed. Shortage would be a problem though.

Agreed. I doubt even the B6's and WN's of the industry could afford NOT to increase the price a legit amount. Unless you like watching your profits go away....in that case...carry on.



I sell airplanes and airplane accessories
User currently offlineStitch From United States of America, joined Jul 2005, 30898 posts, RR: 87
Reply 13, posted (8 years 7 months 3 days 3 hours ago) and read 3066 times:
Support Airliners.net - become a First Class Member!

Also remember the fall of the House of Saud does not mean Saudi Arabian oil stops, and if it did, believe me the EU and Russia would invade, much less the US. And since we're "right next door"...

User currently offlineL-188 From United States of America, joined Jul 1999, 29795 posts, RR: 58
Reply 14, posted (8 years 7 months 3 days 3 hours ago) and read 2983 times:

Quoting A319XFW (Reply 3):
Alberta has got the 2nd largest oil reserves in the world (after Saudi Arabia). It wasn't worth exploring this before due to the low price of oil, but now it's getting more and more worth it

Correct as the prices climb the incentive to explore goes up. And while there is not the big strikes today as there was before, there is still a lot of oil in the ground.

At this time, I think it is also worthy to point out that Hitler was able to run a war machine for the last two years without real access to crude through coal gasification. I don't think this technology is obsolete either.

Quoting Iowaman (Reply 6):
Just pure economics would either bring that price down or find something else cheaper.

Correct. I remember reading one story that said that ethonol production starts becoming economic when oil is in the mid 40's...ditto for those oil sands.

Quoting Stitch (Reply 13):
Also remember the fall of the House of Saud does not mean Saudi Arabian oil stops, and if it did, believe me the EU and Russia would invade, much less the US

Russia wouldn't, they are a net exporter at this point.



OBAMA-WORST PRESIDENT EVER....Even SKOORB would be better.
User currently offlineStevenUhl777 From , joined Dec 1969, posts, RR:
Reply 15, posted (8 years 7 months 3 days 2 hours ago) and read 2869 times:

Quoting N79969 (Reply 7):
Who would be left standing after the dust cleared? I think even financially healthy airlines would be hard pressed to survive at those prices.

Yes indeed. So much for UAL's $50/barrell prediction...  Yeah sure


User currently offlineContnlEliteCMH From United States of America, joined Mar 2005, 1458 posts, RR: 44
Reply 16, posted (8 years 7 months 3 days 2 hours ago) and read 2715 times:

Quoting Widebody (Reply 10):
I wouldn't think such prices would destroy civil aviation, I think a system would be put in place where pax will pay for the increases. Fares are decreasing every day, they can survive a substantial increase. It just means the pricing structure would have to be changed.

Your scenario assumes that demand will remain relatively constant. It won't. And this would be death for many airlines because the fare increase you speak of will not increase net revenue per passenger; it only offsets increased fuel cost. So you get the same net revenue per passenger but fewer passengers. For an industry dancing on a razor's edge in terms of profit/loss, it would destroy quite a few airlines if the price remained high.

And if you doubt that demand will drop, take it from me: I travel every week to a client. Airfare in the month of February is already pretty high. I'm accustomed to paying about $350/round trip, a figure which I can tolerate and which I'm sure is quite profitable for Continental, since they gross about 20 cents per mile when you take taxes and fees out of the ticket price. But the fare in February is approaching $600 per trip. That's really too rich for my blood. I'm into taking my money home to my family, not paying it in expenses.

So I have two choices: fly another airline, which I'm doing this upcoming week, or drive. If it gets really bad, I'll just ask my client to allow me to work from home.

Therein lies a good question! Supposing that oil were to really skyrocket, whose economies will be hurt more? Those who are in the business of producing goods for consumption by foreign markets, or those whose primary products are intellectual services? The former requires people to be in specific places to produce goods; the latter only requires collaboration, via telephone, Net Meeting, and videoconferencing. I personally can do all of my work without setting foot outside of my home, and I'm not alone. It's an interesting question, one which I hope I never see answered.



Christianity. Islam. Hinduism. Anthropogenic Global Warming. All are matters of faith!
User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 60
Reply 17, posted (8 years 7 months 3 days 1 hour ago) and read 2557 times:

well....given that countries such as Iran are on dependent on fuel also (for income), I don't think Iran is dumb enough to shut their spigots, as it would be disasterous for their country


I think the bottom line is nations need to develop alternative energy, because there is only so much fuel around...



"Up the Irons!"
User currently offlineRottamo From United Kingdom, joined Dec 2005, 138 posts, RR: 0
Reply 18, posted (8 years 7 months 3 days 1 hour ago) and read 2557 times:

Quoting N79969 (Reply 4):
Without going into how realistic the scenario is, those prices would completely decimate civil aviation. Virtually all discretionary travel would cease, business travel would be limited to the barest minimum, numerous airlines would be shoved over the edge into collapse.

Actually most economies would ground to a halt if that were to occur.

You are simply wrong because oil is only one part of total costs of civil aviation.

Let’s assume that oil is really five times more expensive than now.

This is from
AMR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(Unaudited)

Aircraft fuel 1,585
Total operating expenses 5,552
=> fuel is 29% of total costs.
Lets assume that they don't change their operations (they will, if oil is more expensive) then total operating expenses excluding oil are 3,967
and fuel cost when oil price is five times higher than now: 7,925

=> Their operating expenses are 115% higher than now.
Do you think that people will stop flying if tickets are 115% more expensive than now?

Of course not. They will reduce flying but saying that they will stop completely is total nonsense.
If we measure price of flying in working hours then I guess that prices will be same than during late 70's. I mean that we measure how many hours you have to work to pay your ticket. Salaries are now days a lot higher than seventies and fares are a lot lower.

So end of civil aviation if oil is $262 is simply not true. And same applies to cars.

Rottamo


User currently offlineMoparman From United States of America, joined Dec 2005, 411 posts, RR: 2
Reply 19, posted (8 years 7 months 3 days 1 hour ago) and read 2526 times:

I think most of these increases are a scheme for oil company profits. I have nothing against making a dime, but when you have companies like Exxon-Mobile making $100 billion - YES $100,000,000,000 in PROFITS then there is a problem - especially when these profits are up more than 100% over the previous year. Also in the article: are you all aware that this guy is a billionare? A multi-billionare in fact. He couldn't care less what the price of oil is or how much it costs to fly. George Soros was actively engaged in trying to raise oil prices for most of the 1990's... WHY IS THAT? I think his prespective is flawed.


"Harming a patient is unethical, but I can inflict as much pain as I like" Dr. Phlox
User currently offlineRottamo From United Kingdom, joined Dec 2005, 138 posts, RR: 0
Reply 20, posted (8 years 7 months 3 days 1 hour ago) and read 2437 times:

Quoting ContnlEliteCMH (Reply 16):
can tolerate and which I'm sure is quite profitable for Continental, since they gross about 20 cents per mile when you take taxes and fees out of the ticket price.

So you are paying 20 cents per mile.

Here is some info from JetBlue's third quarter announcement:

Quote:

"For the third quarter 2005, yield per passenger mile was 7.87 cents, up 6.0% compared to 2004 on a 4.8% increase in average length of haul. Operating revenue per available seat mile (RASM) increased 9.4% year-over-year to 7.15 cents. Revenue passenger miles increased 30.7% from the third quarter of 2004 to 5.5 billion. Available seat miles grew 28.2% to 6.3 billion. Operating expenses for the third quarter were $439.1 million, up 46.1% from the third quarter of 2004. Operating expense per ASM (CASM) for the third quarter 2005 increased 13.8% year-over-year to 6.93 cents. On a fuel-neutral to prior year period basis, CASM increased 2.7% to 6.26 cents. Operating margin, on a fuel-neutral to prior year period basis, was 12.6% in the third quarter 2005. During the quarter, realized fuel price was $1.70 per gallon, a 57.9% increase over third quarter 2004 realized fuel price of $1.08."

if JetBlues CASM will increase 120% it will be 15,25 cents.

Rottamo


User currently offlineMonorail From United States of America, joined Sep 2004, 625 posts, RR: 4
Reply 21, posted (8 years 7 months 3 days 1 hour ago) and read 2365 times:

Quoting Moparman (Reply 19):
I think most of these increases are a scheme for oil company profits. I have nothing against making a dime, but when you have companies like Exxon-Mobile making $100 billion - YES $100,000,000,000 in PROFITS then there is a problem - especially when these profits are up more than 100% over the previous year.

 checkmark 
You hit the nail on the head. It's sickening that increases in the price of oil are almost entirely contrived. The oil companies try to justify it as "supply and demand." Bullsh!t



Playoffs? Don't talk about playoffs!
User currently offlineAS907 From United States of America, joined Sep 2005, 49 posts, RR: 0
Reply 22, posted (8 years 7 months 3 days 1 hour ago) and read 2365 times:

Let's open up ANWR. Get the hippies out of the way who have no idea what they're talking about... and just do it. Living up here in Alaska and having a father who is in charge of a lot of drilling up here, I know a lot about the environmental risks... and trust me... the media has no idea what they're talking about when it comes to the "risks" up here.

User currently offlineContnlEliteCMH From United States of America, joined Mar 2005, 1458 posts, RR: 44
Reply 23, posted (8 years 7 months 3 days ago) and read 2230 times:

Quoting Rottamo (Reply 18):
Do you think that people will stop flying if tickets are 115% more expensive than now?

Absolutely, yes. Many of us will simply *stop* flying. A significant percentage of people will stop flying, both for leisure and for business. You are correct that not all aviation will cease, but any sizeable drop in demand (say, as little as 5%) would pack a hefty punch on the bottom line for nearly all carriers, and the industry as a whole. There will always be somebody who's willing to pay anything to fly, but that's not the vast majority of fliers.

I am not going to fly weekly at 115% over $350. I'm not going to pay $750 every week to fly. I'll drive first. And the reason why is simple math. Assuming 50 weeks annually, your 115% increase would vacuum $20,000 right out of my wallet. That's not just $20,000; that's $20,000 MORE than the $15,000 I already budgeted. $35,000 is nearly as much as the average American earns in a single year. Now do you REALLY think people won't stop flying?

My business partner take his family of four tomorrow from Chicago to Orlando on Southwest, for about $800 roundtrip. Do you think he's flying if the same trip is $1700? No way. And he's typical of a leisure traveler.

And in terms of driving, $750/week on a 1000 mile round trip is a whopping 75 cents per mile. I could buy a brand new luxury car and not spend that much to drive; on my used cars, my actual cost of operation would be under 20 cents per mile. And on a 500 mile journey (the average trip in the U.S. east of the Mississippi is about 500 miles), I would take only slightly longer to drive than I would to fly, particularly if I have to connect.

You want to dismiss the impact of reduced actual passenger miles by saying "They'll change their ops." Of course they will. But this generality flies in the face of your otherwise detailed analysis vis-a-vis fuel. HOW MUCH will they change. The answer is, "Not as much as you think."

In the airline biz, you can furlough employees, you can discontinue routes, and you can shutter whole airport operations. True enough. You can't so easily just chuck your airplanes, particularly if they're leased. And that's the rub. Airlines cannot change supply to exactly meet demand, which is why the slowdown would devastate them. They aren't fast food restaurants, who can simply send employees home early if business is slow for the day.

It's not really about the cost of the fuel. It's about the impact of price on demand, and the inability of the industry to easily alter supply.



Christianity. Islam. Hinduism. Anthropogenic Global Warming. All are matters of faith!
User currently offlinePsyops From , joined Dec 1969, posts, RR:
Reply 24, posted (8 years 7 months 3 days ago) and read 2150 times:

Ah, the great misunderstood oil sands. From reading this thread I can see that it is still very much not on the radar screens of many.

It doesn't need to be discovered - we already know where it is.

Expensive? We make oil from it for $9US per barrel, then sell it for about $65US. Not bad margin I guess.

Vast? Yes - proven reserves larger than the middle east. Unproven accessible with better technology (just like to types of technology they have had to develop and use in some depleted middle eastern fields) into the trillions (yes, with a "t").

Hard to make? Nah. Already pumping a couple million barrels a day from up here.

How do I know? Well, I happen to work "there". Naturally our friends in the US are lining up for a piece of the action, but so far the French and Chinese have out-invested them in the resource.

Cheers....


25 LTBEWR : If oil prices were to ever go above US$100/bbl, I think we would see major worldwide changes in our lives. The world could see major dislocations we h
26 Post contains images Rottamo : I agree that demand might drop a lot. Let's say 50%. When people flew 50% less than now? Early 90's or early 80's? I just try to say that yes, people
27 Cadet57 : Your country may have high gas prices, but it has always been that way in europe(correct me if im wrong) but to us the day gas pegged 2.10 a gallon i
28 B757300 : Sounds like Soros is trying once again to drive up the price of oil and tank the U.S. economy. The moron seems to get his kicks on wrecking economies
29 Falcon84 : It will if Iran goes off in the ME. If Iran keeps up this doomsday rhetoric, I can see it going over $100 a barrel. And if that happens, Mr. Bush wil
30 L-188 : Explain that process to me. I know they are big on Hydrogen power, but the only reason that is viable there is because of the Geothermal reserves tha
31 Halls120 : I doubt it will reach this level, but if it does, thank you great grandpa for not selling those south texas mineral rights!!!
32 Flyingbronco05 : Ready For $262/Barrel Oil? I sure am! Signed George W. Bush[Edited 2006-01-30 03:23:38]
33 ContnlEliteCMH : It may be easier. It's also pointless. Whether people stop flying, or the airlines take huge losses on every passenger they fly, the result is the sa
34 Cfalk : Not exactly happy, but it does encourage people to use less, and provides less funds to the Saudis. Can you imagine what would happen to oil prices i
35 Halls120 : Said digression welcomed. Far too many people actually believe that higher taxes create prosperity.
36 VonRichtofen : They don't run on water, they use Hydrogen fuel cells and the by-product is water. Iceland also uses the natural heat from volcanic activity in the a
37 Cfalk : Thinking about this further, I have another point to add that reinforces my arguement in reply 34. As you said for yourself, a particular product/ser
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