mandarine

When you google 'Airbus Boeing Peak Oil', the top result is this article that I wrote in the summer of 2006. Being a Cassandra proved right gives one all sorts of uneasy feelings, but I will carry on in that direction and offer a revised version of my prophecy, adorned with new details.

In a nutshell: people are talking a lot about the difficulties for airlines with $150-a-barrel oil. But we also have to understand that it is going to be much worse for aircraft manufacturers. They probably know it; but they cannot believe what they know, and they cannot say it either. This is not just another crisis for air transportation and aerospace construction: this is the last crisis until the end of the fossil fuel era.

Hard times for airlines

First an important premise: there are no serious alternatives to jet fuel for airliners. And even if there were, they could never be cheap in a world of expensive energy. The problem is not that oil is scarce: the production has never been this high — that's why we call it Peak Oil. The problem is that energy supply is not meeting global demand: until demand abates, any type of energy will end up costing the same, be it classical kerosene, gas-to-liquid synthetic jet fuel, or biodiesel. Regardless of the environmental footprint. Just know that if it was technologically feasible, filling an A380 tank with biofuel would use up 150 hectares of yearly yield,considering an optimistic figure of 2000 litres per hectare for Jatropha biodiesel. You'd need 150×2x365×150 = 16 million hectares — the arable land in France — to power the currently ordered A380 fleet.

Meanwhile the fuel efficiency improvements do not come anywhere close to compensating the price surge. Boeing claim that their new 787 will burn 20% less fuel than current jets of the same category (namely the 767 or A330). 20% is how much oil prices rose between the beginning of April and mid-May 2008: 30 years of technological improvement in aircraft and engine design will offset six weeks of price increase, and no technological Deus ex Machina will change that deal.

The obvious consequence is that cheap flights are gone for good. We are currently witnessing a fast concentration of the market, because the fierce competition prevents airlines from transferring the whole fuel bill to their passengers. As the weaker players exit the arena, ticket prices will rise until the few remaining airlines can break even financially. We will see a trend of de-democratization of air travel, and people will gradually change their travel habits, starting with the poorer and newer travelers.

There is a second key element that will drive air traffic down: as planemakers' market forecasts point out, air traffic growth is consistently correlated to world GDP growth. No need to be a psychic to imagine that GDP growth will seriously suffer from expensive energy. When people's purchasing power shrinks because of the energy bill, they will think twice before flying. Note that a major economic downturn could very well stop the rise in oil prices or even reduce them for a while. But it will not help air traffic - unemployed people do not fly all that much.

Meanwhile, environmental awareness is growing worldwide: the global warming theme is increasingly popular with the sort of middle class travelers who used to fill economy seats for exotic vacations. There will be less scuba-diving in the Maldives; less horseback-trekking in Mongolia; less leopard-spotting in Tanzania. Flying is losing political correctness points by the day. This is even beginning to reach the corporate world, although sometimes only for mere greenwashing concerns: more firms are asking their employees to fly less, to favor teleconferencing or to merge meetings. Business travel, the spine of airline profitability, is probably weaker than most hope.

I also see a final, more tricky contributor to airline misfortunes: many airlines have based their financial model upon the resell value of their aircraft. Planes are a huge investment, with a long lifetime — a bit like homes. Maybe you see what I am hinting at. Just as the housing crisis brought many people to bankruptcy, many airlines will lose their financial footing when the industry's obvious overcapacity and gloomy outlook pulls the market value of second-hand aircraft down. All this will contribute to reduce air traffic over the next decades, to the levels of the 1990s, then the 1980s, then the 1970s …

Harder still for aircraft manufacturers

The average natural decay of a fleet because of ageing is around 6% a year. When yearly traffic is constant from one year to the next, 6 planes for every 100 go into retirement, and are replaced by newer planes. This means that if airlines cut the world's capacity by a mere 6% each year, old retiring planes will not need to be replaced, and no new aircraft will be sold at all. A 6% capacity reduction is equivalent to just changing the Tuesday flight of the daily San Francisco to Tokyo service from a 747-400 to a 777-300ER. A reduction the economic press or the general public would hardly notice can make Airbus and Boeing assembly lines grind to a halt. US carriers will reduce capacity by 10% to 15% this third quarter of 2008 alone.

All told, the industry will cut capacity by 9% in 2008, according to James Higgins, analyst for Soleil-Solebury Research. (quote from CNNmoney.com)

In short: airlines make money in proportion to air traffic; aircraft manufacturers make money in proportion to air traffic growth. In a world with negative air traffic growth, the former float, the latter drown. Therefore, although we will probably not see the end of air traffic any time soon, this extremely nasty leverage effect will make aircraft manufacturers suffer considerably.

One might argue that in a world of expensive oil, airlines should scrap all old, gas-guzzling planes and buy new, soberer ones instead. That would be easy if they were making a lot of profit or could promise a bright future. But when the industry is consistently in the red zone, and getting redder, bankers do not follow. Few airlines have sufficient cash to sign billion-dollar contracts without external investment. Therefore airlines will be like people in poor countries: they will be running old vehicles which use up tons of gas because they cannot afford the newer models which make twice the miles per gallon.

Admittedly, a handful of airlines will be in a position to buy the new planes. When all the world's money ends up in oil exporters' hands, they have to buy things from us to avoid drowning under the heap of green bills. Aircraft are a great choice, as they are both hard-currency-intensive and fossil-fuel intensive, which oil producers have a lot of, as per design. Consequently, aircraft sales may in fact undergo an increase because of high oil prices. This I call the "Aboulafia effect". I conjecture that such an increase is inherently short-lived. Middle-East carriers will probably become prominent players, and gradually snatch the bulk of the market from the traditional airlines. But air traffic will shrink nonetheless, and all they will need to do is buy back the recent planes from their victims, scrap the old ones, and make the most of a declining market — something they are becoming good at.

As if matters could be any worse, there will finally be a mean backlash effect: thanks to cheap liquidity seeking asylum, the years 2003-2007 were absolutely euphoric in terms of aircraft orders. Manufacturers had to invest massively in infrastructures and people in order to ramp up production and honor those orders. But these planes will not materialize into deliveries before a couple of years. There is plenty of time for many airlines to go bankrupt or otherwise hit financial turbulence. This will mean massive delivery deferrals, then cancellations, so that assembly lines cannot even hold onto their current backlog. Who knows, we may witness the very curious artefact of a negative net yearly order-book. In the real world, that's called jumping off a cliff with a lot of momentum.

The combined value of the orders for Airbus and Boeing planes exceeds $500 billion at list prices, so large-scale cancellations and deferrals could easily amount to tens of billions of dollars and affect suppliers of engines and other parts in addition to the jet makers. (from the Wall Street Journal)

What next?

When that happens, it will be catastrophic for all the people, organisations, or communities, which now contribute to the aircraft manufacturing adventure. This could send Seattle or Toulouse the way British textile, or French foundries went not so long ago. And do not get influenced by prejudice. Aerospace does not have an intrinsically higher value than those industries we have come to regard as lowly. Today's ghost slums were full of very busy and extremely proud people at the peak of their flourishing trade.

I do not know what the smartest move for aircraft manufacturers is, and I am glad I am not in Tom Enders' or Scott Carson's shoes. Publicly acknowledging that the air travel industry is on the brink of inevitable decline would discourage investors and hasten the fall. And yet, the earlier they can start downshifting, the smoother the forced landing. They should be cancelling the B787 (a little too late for that one) or A350 developments, and simply offer to fit new generation engines on good old 767s and A330s. That would already be at least half the fuel economy, for a much smaller cost, while not forcing new capacity on the market place. Or silently work on a totally new kind of bird, absolutely optimized for fuel efficiency, even if it changes the rules of the game: a Mach 0.62, 20,000ft, turboprop, middle-range, high-capacity, DC-4-comfort machine that would be the soberest flying camel to get people where trains can't go for the next half century.

Or maybe steer away from this dwindling trade altogether and find a new frontier. How about giant wind turbines? If those do not sell, nothing will anyway, so that may be worth a try.

Notes

Many thanks to Richard Heinberg and Julian Darley of the Post Carbon Institute for accepting publication at Global Public Media.

Requests for reproduction or translation should be sent to the Post Carbon Institute.

Remember how I said people should read much more than they write? Well, I am doing just that at the moment. That and write post upon post for my gardening blog. This leaves me no huge motivation to post here, all the more so that I am under the impression I would be boring people with the same themes all over again.

For those dear readers who would protest they would not be bored, I offer two solutions:

1. I will be recycling old posts - I know I like to read them again. Maybe you will.
2. I strongly recommend you to read George Monbiot’s articles. He writes the things I would like to write. Only he does it much better. And he knows what he is writing about.

[…] why are we still prospecting for fossil fuels when we already have more than we can safely [global warming] burn? The reason is that governments are pursuing two completely different policies. One is to encourage the production of fossil fuels; the other is to discourage their consumption. Until this conflict has resolved our carbon cutting programs will fail. No company extracts fossil fuels as a hobby. Once removed from the ground, they will be burnt whatever demand side policies say. May I propose a new kind of carbon capture and storage, which is geologically stable and guaranteed to work? Leave the damn stuff in the ground.

George Monbiot, as podium speaker in the Nature podcast

Warning: I could not resist a little doom and gloom.

When we are burning fossil fuels, we only see the environmental impact. There is supposed to be a Kyoto quota, and when we consume more, we feel some sort of hypothetical environmental guilt regarding global warming. The concept of future generations is very abstract, and very uncertain, and it does not make for easy arbitrations in everyday’s life.

Digression on market, non-renewables and future generations

As a side-note, just note that market price is fixed just with today’s supply-demand balance. Future generations cannot stake claims on today’s market, while today’s sales will deprive them of their share. Imagine a group of ten friends camping together in the wilderness, with so much tea for breakfast. Four early-risers sit down for breakfast at sunrise, and drink as much tea as they wish. Four others wake up later, find that there is only tea left for three. Two of them agree to drink just half a mug each in exchange of cookies from the other two. The two late-risers get nothing. Had we placed all ten together with the global tea and cookie problem, the share would have been quite different.

For non-renewables, day-to-day supply-demand market rules are a total nonsense.

An unfair negotiation

But let’s not consider future generations. Let’s just focus on today’s market. What does the price of fuel reflect? It reflects the market and the law of supply and demand of today. The more people want fuel now, the higher the price will get.

I want fuel. Fuel price rises. I can afford it. I pay my fuel. Why should I feel guilty of burning it? Because a sky-high price is just a way of saying that somebody else forsook their expected share of today’s fuel supply. It would be OK if it were my retired neighbor in the same affluent neighborhood who said: “OK, you need to drive to work, I will stay at home instead of going fishing, so you can have my share of today’s gas”. But it is not like this. The negotiation power on a market is money, not importance. Therefore, the final share will not reflect an arbitration in terms of what’s more important to humans considered equals (e.g. trading comfort uses for vital ones), and the rich will always get more of the share, however futile their intentions.

Economic theory says that the rich will pay more, therefore get poorer, while the poor save money by not buying the stuff, therefore things even-out in the end. This is only true if the rich do not get richer with what they get to do with the stuff. And if the poor do not starve before that. Because in the meantime, rising gas prices are also pushing food prices upwards.

In a world of scarce resources in which the power scales are already all the way to our side, something has to break somewhere if we want more for us. Whenever I drive my car for a week-end excursion, whenever I turn heating on, whenever I eat a juicy steak, I can only do this because someone else forsook their share of today’s driving to work, their share of today’s stove, their share of today’s food.

My macabre illustration

Imagine yourself and a small child fighting over a blanket while camping out in a blizzard. The colder it gets, the harder you have to pull to keep warm and cosy. You have more strength, therefore you get more of the blanket, although you do not need it as much as the kid does. At some point, the child is too weak and lets go of the blanket altogether. This is called price elasticity in an unfair market.

I have good friends who are miles away from understanding that our way of life is unsustainable. The minute they learnt they would have a second child, they changed their brand-new car for the same model in station-wagon format. Now they have three kids and will have a fourth one soon, and they have upgraded their car to a mini-van to accommodate the newcomer (in addition to buying a second car for the missus).

When I try to suggest that they should try to invent other ways, all they can say is that they could not manage otherwise. Could not go to work on their bicycles; could not go on holidays by train; could not rent the big car on week-ends; could not take kids somewhere without a full army campsite in the trunk of the car.

Each time someone says (including me) that something pertaining to energy expenses, transportation, or comfort can’t be done otherwise, I feel sad for the next generation, who will have to do otherwise in any case. And if those who have four kids can’t think for the next generation, I don’t know who will.

Energy savings.

A lot of governments worldwide are promoting a gradual switch to renewables. It has long been lip service, but now it will have to be a reality, as even the big petroleum companies are revising their peak-oil estimates - latest is Shell, with 2015. In fact, some are even claiming that we have been on an oil plateau since 2006.

After a peak comes a downhill. After a plateau comes a cliff. Whatever way, the changes that we will have to make to adapt to scarcer oil will be enormous. Even with a 20% yearly growth, renewables will not be able to make a real dent in the total until it is much too late. Even nuclear energy is very very far from allowing such fast ramp-ups.

Let us just take the catastrophic example of bioethanol. Just to reach the 10% bioethanol ratio in US gas tanks, an enormous proportion of corn production has been diverted to be burnt instead of eaten. By an interesting cascade effect, this has sent the price of food skyrocketing worldwide.

A 10% saving in fuel burn can be achieved by simply driving 120 kph instead of 130 kph, therefore losing five minutes for every hour of the trip. Have you never started your trip five minutes late or lingered five minutes along the way sipping a coffee? Why are you in such a hurry anyway? I’d rather take five more minutes for every trip I make than see famin riots all around the world because my pathetic 10% bioethanol has tripled the price of wheat…

Agrofuels are not the way. Nuclear power is not the way. Coal-to-liquids is not the way. Even wind power is not the way.

What then?

As I have said: power savings. Like it is much easier to save a dollar than ask it from one’s boss, likewise is it much much simpler to save energy than to make more. Even a 10% reduction can have great relieving consequences (see above). But I prefer the big cuts. The ones that save 50% or 75%. Let us list some of the things people can do:

• quit flying. One round-trip across the Atlantic costs you your yearly Kyoto quota. Unless you are prepared to quit driving or live in an unheated house to compensate for the trip, you’d better find nice places and people to visit nearer to you (I am sure they exist — keep looking).
• quit driving. As I have written before, driving is not faster than riding anyway. At least, carpool. Drive shorter trips. The longest trip I now drive is the one to the train station (10 km). And most times, I ride there anyway.
• drastically cut on home heating. Stack up your warm quilts and allow the temperature to drop to 15°C/59F in your bedroom. Reef you heated real estate in winter: have the kids sleep in the same bedroom, work in the living room, and stop heating two or three rooms. Consider setting aside one dollar for insulation improvements for every five dollars spent on the heating bill.
• telecommute. Office buildings and factories are very bad in terms of energy efficiency. And you’ll be able to sell your car.
• eat better, eat local, eat less meat, eat less. The ‘less meat’ factor along with the ‘eat local’ factor allow to considerably reduce the energy bill and the environmental footprint in general. Better food may mean ‘more expensive’ (although that is not always the case when you can eat local if you can avoid the distribution network), but because you will eat less meat and less food in general, the overall budget will be reduced.

Look at the list above: none of the items require any money. Power savings are the cheapest renewable energy source. And believe me, the psychological comfort cost is much lower than people anticipate. At least if you can do these things for moral reasons before being forced into doing them by financial reasons. And if anyone tells you that these things can’t be done, just know that they will be done in the near future, that much is absolutely certain.

Now I must go to my boss with these arguments and ask him when on earth he intends to arrange things for me to telecommute.

Day after day, I am more deeply disturbed by the contradictions between our speech and our actions on the environment front. Every time I hear or see someone complaining about the state of the environment, it seems there is always a third-party that can conveniently be blamed for the situation. Let us pick a few examples:

• the price of gasoline: Chinese growth.
• deforestation: Brazilian peasants.
• water pollution: farmers and agribusiness.
• nuclear plants: the nuclear lobby.
• overfishing: those stupid fishermen.
• biodiversity: sprawling third-world mega-cities
• lack of investment in renewables: the government
• financial insanity: those greedy stock-exchange traders
• ad lib.

No need to use a microscope to see that in each instance, we are a link in the chain that leads to the disorder decried. We drive cars, we eat beef or fish, we prefer to buy the cheaper good, we use electricity and we would not want its price doubled overnight, we want our savings to generate an income, etc.

Just like a throng pushing towards the exit can trample or suffocate dozens of people without anyone actually pushing that hard, each time we are a part of one of these chains, our weight adds up to the weight of all the other actors, putting an enormous stress on the end-links until the Earth gives in. The Brazilian lumberjack felling a 200-ft tall tree is no more guilty than his boss, his boss’s stakeholder, or me.

This is not about buying hybrid cars or compact fluorescent light bulbs. It is not about buying organic or fair trade once in a while. ‘Buying’ is the problem; not the solution.

Climatologists, energy experts, agronomists, social workers: they are not talking about a 20% change in fifty years, but about an 80% change in five years. It is about stopping before doing anything and ask myself: if seven billion people behaved like I am about to do, how would the world end up?

Somehow, it is a moral obligation to change radically right now, so that whatever catastrophes happen, I will have tried my best. And if catastrophes don’t happen, then I will jokingly congratulate myself on saving the world. But there is no carrying on pretending. Fortunately, there are tons of things I can do.

If you are not sure you are ready to come into my world with the podcast below, click this link for a really good starting point in the shape of a cartoon (thanks to Charlotte). It’s funny, it’s extremely eloquent, and it is so true before christmas.

In case you can spare one hour of wasted time (commuting, washing up, walking the dog, working out), I invite you into my world:

‘What will we eat when the oil runs out?’. Lecture by Richard Heinberg. (From The Soil Association)