How much does Boeing think oil will cost in future?


Well, depends which question they’re trying to answer. If they’re trying to work out how many airliners they’re going to sell in future then it’s one number, if they’re trying to persuade the USAF to buy their tanker as the KC-X then it’s a vastly different number. Specifically, it’s $70-80 a barrel in the first case, anything up to $200 in the second.

I was set thinking about this by a KC-X press release that Boeing Integrated Defense Systems issued here at the Farnborough air show on the tanker contest. The release relies on an updated version of the earlier study that Boeing commissioned from consultants Conklin & de Decker on the relative fuel costs of the Boeing 767 and Airbus A330.

The new version purports to show the relative fuel costs of equal-sized fleets of 767-200ERs and A330-200s. It does the maths for a 179-strong fleet, with oil price scenarios of $130 per barrel, $150 and $200. Then it produces total costs for four different service lives from 25 years to 80 years. It concludes that the A330 fleet will consume between $11.27 billion and $448.16 billion more fuel than the 767 fleet.

Meanwhile however Boeing Commercial Airplanes has just put out its annual 20-year Commercial Market Outlook (CMO). This is quite an important document and Boeing makes a fair old production out of releasing it each year. It’s rightly proud of how accurate it’s been over the years, as VP marketing Randy Tinseth discusses in the link above.

Anyway, the analysts behind the CMO make certain underlying assumptions to get their numbers – one of which is the average price of oil over the next 20 years. In 2005 they used $35 a barrel and in 2006 it was $50. Not sure about last year, but Tinseth says that in the latest one, issued 12 days ago, it’s $70-80 a barrel.

So which figure does Boeing believe. The one that their commercial airplane business bases its future on, or the ones provided by a consultancy paid to support their tanker case?

Nevertheless, some of you will say, who cares – fact is the A330 burns more fuel than the 767. But if you think that then you must be mystified why otherwise sane and intelligent airline fleet managers, not to mention financially exposed lessors, keep buying the A330. To anyone who understands airliners there is no mystery at all – but what I don’t understand (and I truly would appreciate the education from someone who knows tanking, which I don’t) is why it’s different with tankers and military transports.

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9 Responses to How much does Boeing think oil will cost in future?

  1. Graham Whitehouse July 21, 2008 at 4:52 pm #

    I know a little bit about tanking, having spent 10 years flying KC-135s in the USAF. The primary difference between tanking and commercial haulage is load factor. The USAF is not a for-profit business, and it tends to favor flexibility over efficiency; typically tankers are only sent aloft with full fuel tanks during war time or contingency operations which demand maximum fuel offload. The rest of the time they carry only as much fuel as is needed for their scheduled mission, which in my experience is below half-full a majority of the time. This is done

    In fact, the USAF often sends a single tanker up for practice refueling with a single receiver aircraft (typically a bomber or transport). In many cases no fuel is actually transferred; the benefit is for the crew of both jets to practice their procedures which are mostly old-fashioned “hands-on” type flying (the complex set of interrelated aerodynamic effects of two large airplanes flying in close vertical proximity is still not faithfully reproduced in training simulators). These kind of training sorties make up a substantial portion of annual tanker sorties, even in war time — maybe 50% or more. Assuming that continues to be the case, the aircraft with the lowest fuel consumption, regardless of gross weight or capacity, will save the USAF the most money.

  2. Nicolas July 21, 2008 at 7:42 pm #

    If I understand Mr Whitehouse’s comment, should the tanker to be used in a wartime situation be chosen having in mind peacetime economics?

  3. Kieran Daly July 23, 2008 at 5:06 pm #

    Tks Graham, now that is educational. So some things to discuss: in an environmentally conscious age can the world’s biggest airline continue to operate its tankers in the planet-destroying way you describe; in an age of potential economic meltdown can the WBA continue to waste taxpayer dollars on this epic scale; in an age of competing military priorities ditto; and if the WBA is serious about shifting people and stuff in the KCX, just how different are the economics from an airline?

    I assume that the Air Force operational analysis is a frighteningly complex piece of work and that it works on the tanker/transport equivalent of seat-costs not trip-costs, which is why Northrop says it came up 6% better (as I understand). If it isn’t and doesn’t then Northrop and the US taxpayer might understandably ask why not.

    And I like Nicolas’ comment. A very good question indeed, although I guess the answer is one of degree not absolutes.

  4. Graham Whitehouse July 23, 2008 at 10:31 pm #

    I believe the USAF is the world’s largest consumer of jet fuel, and up until now I would say that this has been viewed more as a point of pride than an indicator of inefficiencies within the institution that require change. However, budgetary constraints being what they are, I would agree that a greater emphasis on fuel conservation will have to happen.

    Whether or not a larger tanker is better than a smaller tanker is highly dependent on a given environment. If you’re transporting a squadron of fighters across the ocean, a larger plane is probably going to get that job done the best. However, if you need to refuel a combination fighters, bombers, EW assets, ISR platforms, etc. in a 1000 sortie Air Tasking Order you’re going to need a lot of refueling booms in the sky to minimize flow time across the tanker. Assuming bigger tankers cost more than smaller tankers, the best solution in this scenario is probably to have a larger number of smaller tankers than a smaller number of larger tankers.

    Absolutely all military platforms are chosen with peacetime constraints in mind. The only question is how to balance peacetime vs operational constraints.

    Thus the complexity of the current Northrop vs Boeing debate and the accompanying difficulty in divining The Truth from the two competitors’ arguments.

  5. SMSgt Mac July 30, 2008 at 6:40 am #

    In appraising the less-than-maximum load carried missions of today vs tomorrow, you also have to factor in the difference in numbers of aircraft used to do the mission overall. In the case of the training mission mentioned above, you could be saving money by flying one tanker out to an area to orbit and have it loiter while several receiving flights came through. With a smaller tanker, you would have had to run a series of two or more smaller aircraft to do the same thing. To really calculate comparative fuel costs, you need to know ALL the parameters of the real missions from the receiver aircraft POV. This includes: numbers of recievers, number of recievers to be serviced per orbit, numbers of touches per sortie per receiver, fuel offloaded per touch, and interval between offload sessions….all the need variables that prohibit simplistic analyses. How much variance can there be? In 1999′s OAF, half the touches made by one B-2 flying from Whiteman to the Balkans and back was done with the same tanker and crew…a day apart. Conversely, fighters touch a boom how often?

  6. Nicolas July 31, 2008 at 5:02 pm #

    Mr Whitehouse, two more questions:

    You mention minimizing the flow time across the tanker by using more booms in the sky…

    -If a larger number of smaller tankers are to be preferred, why not use the P-8 platform instead?

    -to which point would the superior flow rate of the A330-based boom (if I’m not mistaking here) somehow mitigate the need for more booms?

  7. Graham Whitehouse August 4, 2008 at 6:23 pm #

    Good questions, Nicolas. A combination of large & small platforms is in theory a good solution to refueling large numbers of receivers in limited time. The smaller tankers would primarily refuel the fighters, and then themselves refuel from the larger tankers. The bigger tankers would also handle large offloads to the bigger receivers (ISR & bombers). I’ve looked at 737-based platforms, though, and don’t think they have much to offer since at most they could carry ~75000 lbs of fuel. Subtract from that mission fuel plus reserves and you have enough to refuel two 4-ships of fighters. An airplane with such limited capacity would spent about 1/3 of its time in the orbit having to go to the (bigger) tanker itself for more gas. I’m not aware of another platform sized somewhere between a 737 and a 767 that offers a better combination of fuel capacity and economics (low cost).

    As for the supposed higher flow rate of the A330 platform (which I hadn’t heard of before), for fighters and similar small platforms the offload rate is limited by the receiver’s fuel system, not the tanker’s. For example, a KC-135 can offload to a B-52 or other similar large aircraft better than 6000 lbs/minute, but with most fighters it’s typically 1/3 of that or less because the receiver systems can’t handle as much pressure. Drogue receivers tend to be the worst in this regard. I suspect that is a consequence of basic fluid dynamics and the relatively small diameter plumbing used by necessity on smaller aircraft.

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