Originally Posted by Oldfreightdawg

When all of the hoopla about oil at $100/bbl, or even $120/bbl reaches the power brokers in the oil industry, their response is often simple: on an inflation adjusted basis, oil is about where it should be. Few of us remember when oil was at $12/bbl in 1998 and the oil companies were on the ropes financially. In fact it was $12/bbl that drove consolidation in that industry, which is why we are experiencing $100/bbl oil today.

On the other hand, airfares when adjusted for inflation are 50% below what they were in 1978. That, more than anything is why consolidation is upon us, not because oil is $100/bbl. If oil were to reach $200/bbl, AMR would have to raise it's fares by an average of $108 per passenger (3.2 billion gallons at $6/gallon divided by 120 million passengers). While a fare increase of that magnitude is not probable in the very short term, it would still make airfares well below inflation adjusted rates from 1978.

Raise Fares, and the problem goes away.