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Old 10-15-2007, 10:50 AM   #5  
Pilotpip
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Joined APC: Jun 2005
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As oil prices increase alternatives will be come much more viable. By letting prices get to $110 a barrel they're shooting themselves in the foot in the long term. Shale oil and other alternatives suddenly look much more cost-effective which will chip away at any bennefit to high oil prices.

And no, Ethanol isn't the answer. Corn crops were horrible in the US this year because of widespread drought conditions across the midwest and the flooding in Kansas and Oklahoma in the early summer months. Food prices would be severely effected by a dramatic rise in corn prices which would cripple the economy.

As far as the airlines, AA announced they're increasing their fares by $5 on routes not contested by LCCs. So that means they're raising them on about 3 routes. Recent years have proven that airlines would rather bleed to death than charge a fare that actually allows for the cost of that seat to be accounted for.

One could also draw a parallel to the cyclical nature of oil and the airline industry. We've seen high prices before (embargo, Gulf War I) and they have stabilized and dropped.
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