Airlines: The Canary in the Peak Oil Coalmine?

Airlines: The Canary in the Peak Oil Coalmine?

5.7.08 Michael Chiacos, Energy Program Senior Associate, Community Environmental Council

Four airlines announced their bankruptcy in April. While Frontier plans to reorganize and keep operating, three of them, Aloha, ATA, and Skybus, are all grounded for good. Other airlines are taking huge losses, cutting staff, and slashing their routes and numbers of planes. What is causing this havoc in the airline industry? $100 a barrel oil prices. Actually, as of mid April, make that $120 a barrel oil.

Recent turmoil in the airline industry may just be the canary in the “oil mine” that wakes up Americans to the idea that the era of cheap oil is over. Inexpensive energy underpins our economy and our way of life.

While the rising price of our daily commute is obvious, people think less about how our industrial agriculture is essentially a way of turning cheap energy into food, our globalized economy demands components and products from across the globe, and petroleum-derived plastics are everywhere from the clothes we wear, to the computers we use, and the cars we drive.

Our economy, infrastructure, and way of life are highly dependent on fossil fuels, and now many experts believe the era of cheap oil is over. This idea, known as “peak oil,” refers to the maximum rate of global petroleum production, after which production goes into terminal decline. After peak oil, the current slow-moving energy crisis will become progressively worse as energy hungry nations bid up prices on ever decreasing supply. Considering the recent run-up in oil prices, does this scenario sound familiar?

For many years, the United States was the top oil producer in the world, but in 1971 our oil production peaked. We now produce around half of what we used to, and with increasing demand we today import around 70 percent of our oil. Sharply higher energy prices are wreaking havoc on our economy, increasing our trade deficit and increasing the vulnerability of our economy.

Some experts believe we are currently in the midst of global peak oil, as over the last few years oil supply has been on an undulating plateau of small decreases and rises from quarter to quarter, but no major increases that would keep up with increasing demand from China, India, and other rapidly developing countries. Even the ever-optimistic government forecasters, the Energy Information Administration, believe peak oil will occur eventually, just not for a couple of decades. Of course, this was the same agency that predicted five years ago that oil prices would hit the high price of $24.68 by 2020.

Even more alarming than peak oil is the notion of “peak exports.” Texas petroleum geologist Jeffrey Brown and Samuel Foucher, have recently conducted extensive analyses of the top five oil exporting countries’ past and future production. These countries are generally growing fast and consuming more oil domestically, at the same time as they are producing less oil. Brown and Foucher conclude that these countries – Saudi Arabia, Russia, Norway, Iran, and the United Arab Emirates – will probably have literally zero oil to export by about 2030.

Recently, Saudi Arabia’s King Abdullah announced that his country (the number one oil exporter) will not expand production beyond investments already in place. This followed the recent revelation that 2008 Russian oil production is forecasted to be smaller than 2007 levels (they are the number two oil exporting country).

For an oil addicted nation, it is scary: the top five oil exporters, accounting currently for half of all exports, will, under Brown and Foucher’s analysis, have literally zero oil to export by about 2030.

So what do we do?

In 1998, oil cost as little as $9.16 a barrel, but in just ten years prices have increased by 1,300 percent! And while oil is our primary cheap energy source, coal, natural gas, and uranium have all seen huge price increases in the last decade. This means that we cannot simply switch fossil fuels or rely on nuclear power as a substitute (which, besides high cost, has a number of other very unattractive features), but instead must change our lifestyles and our sources of energy.

The most important collective action is to urge politicians and planners to take serious measures to improve the efficiency of our vehicles and buildings, and rapidly increase deployment of renewable energy technologies like wind, solar, geothermal, biomass and small hydro.

Individuals should start now to insulate themselves from high energy prices. Purchase the most efficient vehicle possible, and use it to carpool. Better yet, move closer to work, take public transportation, ride a bike, walk. There are also many things one can do around the house and in daily habits to reduce energy use.

And invest in some teleconferencing gear, as flying is about to get even more expensive.