{"id":2621,"date":"2011-01-29T23:34:57","date_gmt":"2011-01-30T06:34:57","guid":{"rendered":"http:\/\/cafe.foundation\/blog\/?p=2621"},"modified":"2011-04-26T19:35:51","modified_gmt":"2011-04-27T02:35:51","slug":"rising-oil-prices-a-%e2%80%9cwake-up-call%e2%80%9d","status":"publish","type":"post","link":"http:\/\/cafe.foundation\/blog\/rising-oil-prices-a-%e2%80%9cwake-up-call%e2%80%9d\/","title":{"rendered":"Rising Oil Prices a \u201cWake-up Call\u201d"},"content":{"rendered":"

With revolt and possible revolution threatening the shutdown of the Suez Canal and driving crude oil prices up, a recent article in Flight Global<\/em> <\/a>merits reflection.<\/p>\n

Flight Global\u2019s<\/em> lead sums up a threat and a hope in one tidy paragraph.\u00a0 \u201cThe International Energy Agency raised an alarming note as our power-hungry lives got back into gear after the holidays. \u00a0\u2018Oil prices are entering a dangerous zone for the global economy. The oil import bills are becoming a threat to the economic recovery. This is a wake-up call to the oil-consuming countries and to the oil producers,\u2019 it said.\u201d<\/p>\n

\"\"<\/a>

Rising prices for crude and jet fuel following a peak in 2008<\/p><\/div>\n

With fuel prices at the end of 2010 up one-fifth over those at the end of 2009, ticket prices necessarily follow, with the danger of lower passenger loads, fewer flights, and generally diminished convenience and economy for air travellers.\u00a0\u00a0\u00a0<\/p>\n

Some carriers such as RyanAir, already notorious for suggesting pay toilets on their airliners, tactically hedge by buying an oil company\u2019s future reserves at a current low price when they think prices will rise.\u00a0 It\u2019s a gamble, but less so in an era of post-peak oil, with prices almost certain to escalate.\u00a0 Bigger carriers, such as Air France, British Airways and Lufthansa, practice strategic hedging, always buying future fuel at current rates.<\/p>\n

At some point, oil companies may withdraw such pledges to future capacity, leaving everyone to pay market rates.\u00a0 As oil prices near $100 per barrel, the pain may extend to everyone, including the oil companies.\u00a0 Fewer passengers will equal fewer barrels sold.\u00a0 Accord to Flight Global, the Saudis are countering this by increasing production to maintain oil in the $70-$90 per barrel range, and thus maintaining the status quo \u2013 for now.\u00a0 How long that pricing strategy can hold out against diminished reserves and reduced shipping reliability will be a question of how much fuel all users demand.\u00a0 Larger demand shortens the time until a true day of reckoning.\u00a0 Producers and consumers alike must make difficult decisions based on that encroaching reality.<\/p>\n

A promise inherent in higher crude prices is the added incentive for governments and private industry to invest in promising bio-fuels development.\u00a0 At what point development of and risk-taking for new technologies outweighs loyalty to the tried-and-true is debatable, but the hovering threat of $100 per barrel oil seems a likely goad.<\/p>\n

Turmoil in Egypt, possibly emulated in other countries, might be the biggest reason to look elsewhere for future energy needs.\u00a0 The cost of military intervention will probably become less desirable as an option for the developed countries, and thus less of a hold that non-democratic leaders can maintain over their own people.<\/p>\n