On Aviation, Oil and Tourism: Glimpses of the Future

 

 

Modern mass tourism became a reality in the sixties due to the convergence of a number of factors that mainly arose during World War Two. The belligerents acquired experience in the design, construction and operation of vast fleets of heavy bombers used in air raids. The invention of the jet engine and radar by Germany and Great Britain enabled fast and safe air travel. The war effort required large volumes of abundant and cheap oil that enabled the emergence of an increasingly sophisticated and capable oil industry.

Tourism owes much to modern warfare.

 

After more than 50 years the airline industry is taken for granted: readily available, safe, fast and affordable now and for the foreseeable future. Indeed, across the planet there is high hope for air travel and tourism as engines of future growth.

 

Our understanding of energy and technical issues does not allow us to have the same optimistic views given that (1) oil is essential for air travel as there are few substitutes to it and (2) world oil dynamics are changing fast in ways detrimental to the airline industry. Let us see why.

 

Historically attempts to find substitutes to oil as transport energy have been very difficult. During World War II, Germany used coal to produce synthetic oil, but the process was expensive and it never produced enough fuel for its vast armies, a significant factor in its final defeat. After the War, Apartheid South Africa set up a coal to liquid fuel industry (that still exists); in part to circumvent the oil embargo it was subjected to from Oil Producing and Exporting Countries (OPEC). In both cases, those inhumane regimes never managed to produce enough liquid fuels for their own uses.

Recently there have been efforts to use vegetable oils as feedstock for aviation fuel. Although technically successful the volumes produced were minute. Even if production were to increase over the years and adding liquid fuels from coal, the world will probably never produce enough alternative fuels to offset more than a modest percentage of its current oil based aviation fuel needs.

 

On and off there is talk in some quarters about the use of liquid hydrogen as transportation fuel. Alas there are no known safe and economic ways to store and carry large volumes of liquid hydrogen. Note that there are no technological substitutes for jet turbines which have proven their worth since World War 2. Hence, it is reasonable to assume that in the coming decades there shall be no substitutes for oil or for jet turbines in aviation. The fate of aviation and tourism here and elsewhere resides with oil. It is ironic that the capacity of humans to fly to the blue skies depends on oil that gushes forth from the dark hells of the subterranean worlds. We should ask ourselves what will be the state of oil supply, demand and prices in the coming years. Although these are difficult questions, some light can be shed on oil dynamics.

 

 

Oil, coal and natural gas are finite, non-renewable and immense resources that were generated millions of years ago from the slow transformation of biomass buried deep within the earth’s crust. Each ton of coal, oil or natural gas extracted from within the bowels of the Earth inevitably reduces the remaining volumes.

 

As volumes in Earth’s crust diminish, a point will be reached thereby the resource is unable to sustain current volumetric production which therefore begins to drop. It is a physical inevitability. As the resource is depleted, production slips year by year until extraction is marginal and then abandoned. Production declines can be reversed if new resources are discovered and exploited or if new technologies are used on previously costly and difficult to exploit resources.  

 

An excellent case study is the history of oil production in the US over the last 150 years. The US was one of the first countries to extract oil during the nineteenth century. Initially production was on land from oil fields in Pennsylvania and Texas. In due time, the US became a leading oil producer. In the forties, oil was extracted from the shallow waters of California. In the sixties, technology enabled oil production in the deeper waters of the Gulf of Mexico and in Alaska.

 

Then in 1970 US oil production began to slip as depletion gripped many of the large oil fields. We note that as US production slipped, the first oil shocks occurred (1973, 1979) with large increases in oil prices that impacted the world economy. But with new production from the North Sea, Alaska and Siberia during the eighties, prices dropped to low levels for the next 20 years. In the meanwhile US oil production continued to slip relentlessly.  From 2004 prices began an upswing that brought them to stellar heights unheard of before, breaking earlier records in constant US $ terms.

In all probability, the high oil prices of the period 2004 to 2014 contributed to the economic crisis of 2008/2009. At the same time, something happened to US oil production as unexpectedly it began to rise steadily from 2008 till 2015 whilst oil prices tumbled by 50% in 2015. This reversal of fortune can be explained by the fact that US oil industry began exploiting massively a difficult oil resource known as shale oil or light tight oil. This resource had been known about and exploited since the fifties but its production began to rise from 2008 because of improvements in technology and large influxes of financial capital attracted by high oil prices. After an eight years bonanza, oil production from these fields are expected to flatten off about now (2016) and begin to decline by 2020 as depletion sets in. It will probably drag US oil production down with it.

 

Eventually oil depletion always wins despite immense technical and scientific expertise, capital and manpower. What happened in the US also happens elsewhere and in time oil depletion takes over the show world wide. But it does not happen overnight, depletion as an implacable foe wins battle after battle flattening out world oil production, creating price swings, impacting economies the world over and eventually dragging down world oil production. Currently, oil production is increasing modestly and prices are fairly low but future violent price swings are inevitable given that depletion never sleeps. Slowly but surely a period of maximum production will be reached followed by a slow and uneven decline stretched over many decades.

 

A majority of studies place that event over a 2010 to 2020 period. Very few studies push it to 2030 or beyond. Nevertheless, it is clear that a peak and decline in world oil production occurring within a narrow time frame is extremely likely. Therefore as oil production stagnates and begins its decline, oil prices may become increasingly volatile, rising rapidly to high levels and then crashing just as quickly as demand is destroyed, then the cycle will begin anew as depletion bites further. Given that air travel is irremediably tied to oil, the impact on that industry will be profound and long lasting. Highly volatile oil prices will cripple air travel and tourism; long haul flights will become increasingly expensive and unaffordable to the majority.

 

In time, only the wealthy will be able to fly frequently over long distances, for the majority long haul flights will be fairly rare events. Long haul mass tourism will contract significantly and tourists will probably seek destinations closer to home. In such a context fewer European tourists may travel to a far away place like Mauritius but rather opt for Mediterranean destinations. Chinese and other Asian tourists also may opt for closer places to visit like Vietnam, Burma and the Philippines. Indians may still come to Mauritius but in fewer numbers. We do not believe that East Africa will ever become a major source of tourists as upper class East Africans may not be particularly interested in visiting beaches here similar to what they have in their home countries. The Middle East is in upheaval due to rampant American, European and Israeli interventionism and aggression. It seems likely that these factors will not abate any time soon. It is best not to expect many tourists from that region.

 

In conclusion, air travel and mass tourism are irremediably tied to cheap and abundant oil whilst high prices spell deep trouble for these industries. They may not withstand such seismic changes and may end up severely dislocated, shadows of their current selves. It is probable that air travel and tourism will return to what they were in the sixties: privilege of the wealthy. Currently we are living in the golden age of air travel and mass tourism; enjoy it while you can, they are not destined to last long.

 

Karim Jaufeerally – Institute for Environmental Studies