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Aviation History
1974
1974 - 0076.PDF
70 AIR TRANSPORT Fuel prices hit tourism . . . but alleviate energy crisis THE RAPIDLY RISING COST of crude oil has saved the world from a major crisis caused by exhaustion of supplies in the 1990s. This was the sentiment expressed by Mr Ernest Evans (lecturer in oil technology, Imperial College) at a seminar in London last week entitled "Tourism and the Energy Crisis." Another speaker, Mr Charles Barnard (head of inter national affairs, British Tourist Authority) said a price guarantee on 1974 holidays would be of great value in the present British economic climate. But Mr William Richardson, engineering director of British Caledonian, said that with the rising price of fuel it was impossible to quote for a charter flight without an escalation clause. He said that by the end of February the price of aviation kerosene would have risen to 150 per cent of the cost at the same time last year and that it would then represent from 25 per cent to 27 per cent of total operating cost (double that of last year). This would then be no less than 50 per cent of the direct operating cost for scheduled airlines and more for non-scheduled carriers. An oil company view was put forward by Mr Guy Jillings of Shell who said that the world had passed through a "peaceful discontinuity of history" with the changing oil situation. As an aside, he said that large-scale use of JP-4 fuel would not come about—it contains a naphtha fraction and Mr Jillings thought this was far too valuable to use in jet fuel. Mr John Seekings of Tourism International, co-organiser of the symposium with the Association of National Tourist Office Representatives in Great Britain, predicted a very poor early summer on the holiday market because of general pessimism and pricing uncertainty but he looked forward to a recovery in the autumn. Mr Barnard of the BTA said that the three-day week in Britain would be extremely serious for tourism if it lasted until June or July, although he was relatively optimistic that any discretionary income available might be spent on holidays because the consumer-durable sales boom was slackening now that people had already bought their colour televisions. Incoming tourists are most essential to the balance of payments in the light of the rising import bill for oil and the BTA, he said, was lobbying the Government to ensure that they would get an adequate petrol supply for their cars if rationing were introduced. Mr Barnard emphasised that now was the time for all governments to be told of the relative importance of incoming tourists to the balance of payments in relation to manufacturing industry. Before Christmas it looked as if the petroleum supply situation would be critical, noted Mr Evans, but now the crux of the problem was price. This was working to our benefit in the long term, however. Economically recover able reserves were quoted at about 700,000 million barrels, which are being used up at 21,000 million barrels per year. Historically the rate of consumption had been rising at 5 per cent per year, so 15 years from now the rate would be doubled, and supplies would be critical by the end of the century. Nothing like the 5 per cent growth rate will now come about, said Mr Evans. It could well come down to 2—222 per cent with the price rises and exploitation of other energy sources. Known supplies were thus predicted to last well into the next century when oil would become primarily a source for the petrochemical industry rather than a transport and heating fuel. Estimated unproven reserves were put at 2,000 billion to 2,200 billion barrels (billion = 1,000 million), mostly under the sea bed, too deep to be exploited at present. The western world would be in the hands of the Middle Eastern countries for the short term but, he said, the rising cost of crude oil had now made alternatives economical— FLIGHT International, 17 January 1974 • Oil prices are now so high that the long-term supply situation is no longer critical. Tar sand, shale and coal are now economical oil sources and vastly increase potential oil reserves—oil geologist. • By April fuel will represent 27 per cent of total operating cost of scheduled airlines and 50 per cent of direct operating costs. Fare increases of at least 11i per cent are required to compensate for it—airline executive. • High fuel prices will bring about rationalisation by airlines which management has failed to achieve in the past—airline executive. • Jet B (JP-4) fuel will not become widely used in the long term because it contains naphtha fractions far too valuable to the petrochemical industry—oil company economist. • Tourism (and hence the charter airlines) will come to be regarded as a very valuable source of foreign exchange as oil prices hit the balance of payments—tourism expert. extraction of oil from tar sand, shale and coal. Western Canadian tar sands alone contain the equivalent of known - workable liquid oil reserves—700,000 million barrels. The surface deposits of these sands were economic to process even eight years ago. The same quantity is also available in Venezuela, according to Mr Evans, and in other places. Similarly, only a cubic mile of Iranian shale has been shown to yield 130 million barrels. Coal could also yield oil economically now—a ton of coal at the UK price of $15 yields 16,000 BTTJs per US cent. - Oil yields only 3,400 BTUs per US cent at the current $15 per barrel. There is thus plenty of economic leeway for expenditure on the hydrogenation process whereby coal can be converted to oil, according to Mr Evans. He gave a vote of thanks to the Opec countries for pricing policies which have created conditions under which the rest of the world was also waking up to the advantages of developing energy sources under independent political control. He reiterated that there was no real short-term oil scarcity— the only problem was one of price. Mr Jillings of Shell suggested that there were advan tages in any situation and that we should not just respond to threats but turn the problem to advantage. In retro spect he thought the shortage would be seen to have been very limited and confined to only some oil products. He said that the new prices required a new world framework for buying oil, and that countries with balance-of-payments problems would have to cut back home demand and con centrate on exports. Disincentives might be brought in to limit overseas holiday travel by nationals of such countries, but not in an election year. The shortfall in aviation kerosene availability at present was quoted as between 10 oer cent and 30 per cent depend ing on location throughout the world. Petrol availability was 10 per cent to 20 per cent down but marine oil supplies were 90 per cent deficient in places, ranging down to a ' 10 per cent shortfall. Mr Jillings expected to see priority in fuel allocation for charter airlines and the subsidisation of incoming tourists, to lessen the balance-of-payments problem caused by the oil price rise. ) He painted a very gloomy picture for cruise liners this summer and only half jokingly suggested that cruises should run between oil-producing states. For the scheduled airlines, however, he thought "whopping profits" would result from cutting out empty seats. Flight notes that in the second quarter of 1973 the three wide-body transports in US airline service averaged an overall load factor of fl only about 36 per cent. For charter airlines the situation Ef was very difficult and they needed support. A free-market • price of 45 cents per US gallon of aviation kerosene was M quoted for Heathrow last week, compared with 12 cents to « 14 cents a few months back. There was, said Mr Jillings, m
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