The collapse of British Airways
John Band has a good analysis of the current British Airways strikes over at his place. It’s well worth a read.
He opens the piece by pointing out that BA’s “business model is unsustainable”. This is true in the sense that he describes it. But it’s also true in another sense; one that’s shared by the airline industry as a whole. Some within the industry have begun to belatedly wake up to this fact. A month or so ago, Richard Branson (of Virgin Airlines fame) had this to say…
Of course, anyone who has been aware of the peak oil problem for longer than ten minutes will find themselves shaking their head in dismay at Branson’s statement. His belief that five years represents enough time to prepare for “the oil crunch” is roundly contradicted by every serious analysis of the problem that’s been carried out to date. Most famously (and arguably most authoritatively) the Hirsch Report, carried out by the US Department of Energy, has this to say about the length of time required to prepare for, and mitigate, the effects of peak oil.
Mitigation Efforts Will Require Substantial Time
Mitigation will require an intense effort over decades. This inescapable conclusion is based on the time required to replace vast numbers of liquid fuel consuming vehicles and the time required to build a substantial number of substitute fuel production facilities. Our scenarios analysis shows:
- Waiting until world oil production peaks before taking crash program action would leave the world with a significant liquid fuel deficit for more than two decades.
- Initiating a mitigation crash program 10 years before world oil peaking helps considerably but still leaves a liquid fuels shortfall roughly a decade after the time that oil would have peaked.
- Initiating a mitigation crash program 20 years before peaking appears to offer the possibility of avoiding a world liquid fuels shortfall for the forecast period.
Even taking this into account, there’s a very real possibility that — with regards to the modern airline industry — the problems presented by peak oil simply cannot be mitigated. Even if we had two decades, which appears not to be the case, there’s just no alternative fuel for modern commercial aircraft.
Let me stress that nobody sane is suggesting that oil or jet fuel will disappear overnight. Peak oil will result in a gradual reduction in crude oil production capacity of between 3% and 6% per annum. This will, however, be more than enough to cause massive economic upheaval of the kind that will certainly overshadow our current credit crisis*. More specifically, it’ll be enough to put an end to mass air travel in anything like the form we presently enjoy.
Put bluntly, British Airways is part of a dying industry. Flying millions of people around the world in jet aircraft is unsustainable in the short to medium term and while some form of commercial air travel will surely remain available to the extremely wealthy, the industry will soon be a tiny fraction of its current size.
I like to imagine a future — say a hundred years from now — where we have successfully weathered the twin storms of resource depletion and Climate Change. Where we have achieved, almost certainly through terrible suffering and struggle, some kind of balance with our environment. Where we have adopted an ethos and a lifestyle that allow us to look towards a sustainable future. And in this future, I imagine our great grandchildren flying across oceans in magnificent solar-powered airships.
But that’s science-fiction. A speculative future that becomes less and less likely every day we persist in ignoring the need for it.
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March 29th, 2010 | 3:19am
by Tweets that mention The collapse of British Airways (The Quiet Road) -- Topsy.com
[…] 2: Jim notes that BA’s business model is also unsustainable in the sense that the oil’s going to run […]
March 29th, 2010 | 3:23am
by Banditry » Those British Airways strikes
We need to adapt. Take a look at this article The Great Transition: http://www.scribd.com/doc/21656220/The-Great-Transition-Navigating-Social-Economic-Ecological-Change-in-Turbulent-Times
March 29th, 2010 | 1:48pm
by vaa
An identical comment was made on a recent post here, vaa. The article you link to is a good one and is relevant to the topic but the nature of the comments posted here make them seem like spam. So just to let you know… if the same comment is submitted again, it will not be approved.
March 29th, 2010 | 2:11pm
by Jim Bliss
some more science fiction here, perhaps:
Algae to solve the Pentagon’s jet fuel problem
my point merely being that the future is uncertain, and might turn out better than you think (my point not being that this particular biofuel will be our saviour)
March 29th, 2010 | 2:44pm
by Luis Enrique
I completely agree, Luis. The future is indeed uncertain and it might well turn out better than I think. But a policy of putting your weekly pay packet on the rank outsider in a horse race is a guarantee of far more hungry weeks than well-fed ones.
Our society is like a car hurtling towards the edge of a cliff. Right now we’re all sitting in the back seat, nodding sagely and pointing out that it’s possible we might run out of fuel before we get to the edge. And while that may be true, it’s hardly very sensible of us.
Given our current knowledge and available technology, peak oil will prove disastrous for modern civilisation. We can either come up with a plan that utilises that knowledge and technology to minimise the damage. Or — as is happening — we can ignore peak oil; a course that pretty much maximises the damage; while on the rare occasions we do consider it, placing our faith in some as-yet undiscovered solution.
I used to work as an engineer. As a result I know how absurd it is to apply imaginary solutions to real problems.
Let me assure you that I will celebrate more than most should we ever discover a “fix” for peak oil (because, unlike most, I’m aware of the seriousness of the problem). But to assume, without evidence, that such a “fix” will be found — given the risks involved if we leave it too late — is madness.
Instead we should start preparing for peak oil (and resource depletion more generally) right now using the knowledge and technology we possess right now.
March 29th, 2010 | 3:35pm
by Jim Bliss
I don’t mean to come across as complacent laissez-faire-ist, I’m all for governments doing various to prepare for peak oil (which as far as I can see, more or less overlaps with the need to do so for climate change reasons). Perhaps I am more optimistic than you about market mechanisms (price changes, investment in alternative energy) and current progress in that direction, but perhaps I simply don’t appreciate the urgency of the problem. Can I presume you think market participants are similarly unaware, and hence there is going to be a nasty period of dramatic price increases when realisation dawns?
March 29th, 2010 | 4:20pm
by Luis Enrique
Luis, it’s probably fair to say that Karl Marx was more optimistic than me about market mechanisms*. Actually that’s not strictly true. I have no problem with free markets for a restricted set of products, services and commodities. But because I wouldn’t put food, energy or non-renewable natural resources into that restricted set, it’s probably accurate enough to paint me as anti-free market. I’m fine with a free market in computer games, business consultancy services or surfing lessons (to take three completely random items). But I believe free markets in bananas, oil or copper (to take another three at random) ultimately create more problems than they solve.
You presume correctly. I’ve been researching the issue since it came to my attention almost 15 years ago. Occasionally the problem is recognised by ‘market participants’. Eleven years ago, for instance, an analysis of the oil industry carried out for their investors by Goldman Sachs concluded:
The Hirsch Report (cited in the blog post above) was produced by the US Department of Energy 5 years ago. And yet with the sole exception of Sweden (the one nation I’m aware of that has placed peak oil at the centre of their national policy) no effective action has been taken to address the problem.
I believe this is a direct result of “leaving things to the market”. Peak oil will not manifest within the market until it is already upon us. At that point, it will already be ten or twenty years too late to deal with properly.
In fact, it’s my own belief that we reached a global peak in oil production during the last three years or so (I cannot yet substantiate this as it’s clearly not something that can be confirmed without several years of ‘post-peak’ data). It was partly the supply constraints created by this peak that led to $140 per barrel oil a couple of years back, which in turn was one of the factors — though not the primary one — in our current economic slump.
* I’m not a Marxist, incidentally.
March 29th, 2010 | 5:01pm
by Jim Bliss
well it’s certainly an interesting set of questions, and one that I don’t feel qualified to contribute much to. I don’t know what non-free-market systems you envisage for food, energy and similar; my (limited) knowledge of the track record of non-free-market systems doesn’t make me terribly optimistic about them either*. Things I don’t know, which strike me as important, is how forward looking market prices are (when is realization going to dawn, and how much oil will be left when that happens), how high will prices rise, and how quickly can the world install all manner of alternative energy infrastructure that the rising oil price will have rendered cheaper than the alternatives. The reason I consider myself optimistic about market mechanisms is that I’m under the impression a few alternative energy techs are close to being goers without dramatic changes to the situation, and should prices start to explode, I’d expect things to get into gear quickly enough to avert utter disaster. But as I say, I could be totally wrong about that.
* of course the current state of affairs is located somewhere in the middle of a line that starts at a Friedman fantasy and ends with a planned economy … plenty of people would call the markets in food etc “not free” already; these terms are hopelessly vague. I think I’d like to see the market for food become more free (winding down EU protectionism) and the market in energy less free (higher carbon taxes, environmental legislation and investment subsidies). When I’m in discussion with left-wingers I’m usually taken to be the spawn of Thatcher, and with right-wingers that of Tony Benn, such is the fate of equivocating centrists like me.
March 29th, 2010 | 6:32pm
by Luis Enrique
[…] the comments thread to my previous post, Luis Enrique suggests he’s optimistic about the ability of market mechanisms to mitigate the worst effects of peak […]
March 31st, 2010 | 6:50pm
by Peak oil revisited (part 1) (The Quiet Road)
Hey Luis. I’m afraid my response to your comment grew into a rather long essay. I’ve posted the first two parts and will hopefully get the third part up by the weekend. Not sure yet if there’ll be a fourth part, but probably not (I think I can get everything else I want to say into Part 3)
March 31st, 2010 | 6:52pm
by Jim Bliss
We have to take into account human nature here too.
People will not choose an energy system for running their car/heating their home/flying a plane that costs them more money.
As soon as that 3% – 6% reduction per year starts there will be a major shift in capital investment. Far greater than anything a Govt can muster.
The technology in ground source heat pumps, solar etc will fly ahead at a speed you can only dream of. As soon as it becomes cheaper to heat your house or light your bulbs with another energy source you will see a huge change. Only capitalism can deliver this and only markets can respond to the huge demand for this energy that will be unleashed when the price point reaches tipping point.
May 25th, 2010 | 10:18am
by Rob H
Peak oil has been predicted with ever increasing regularity since the 1850s (they were about to tun out of whales). It is rubbish for 4 reasons
1) When the market is there for something it will be produced. See Julian Simon on the subject.
2) We have enormous reserves of tar & shale oil which, with improving technology, are now usable (see point 1)
3) There is no question that some abiotic oil exists (ie oil produced by geological processes rather than biolohical). You have to drill deep for it but, bearing in mind the age of the Earth quantities must be orders of magnitude greater than biological oil.
4) We are starting to produce oil grown from alge. When this is a mature technology it will be, by definition, unlimited.
5) Oil is simply an energy storage medium. We can produce unlimited energy by nuclear power. If necessary we could use electricity to peoduce oil as oil can now be used to produce electricity.
OK I said 4. I could probably keep going if required.
May 25th, 2010 | 5:25pm
by Neil Craig
Hi Neil. Thanks for stopping by and leaving your comment, though — as I’m sure you can imagine — it’s not one I agree with.
People have indeed been predicting the end of oil for a long time. However, it wasn’t until the 1950s that they were doing so with a demonstrably correct methodology. The notion that incorrect past predictions of an event or process automatically invalidate all future predictions is logically incoherent.
If we both get into a car and start driving, I can predict that we will run out of fuel after 10 miles. If we pass the 11 mile mark without running out, and you turn to me and claim this demonstrates that we will never run out, you are not making a valid point.
I recently wrote a three part article on peak oil which provides a very brief summary of some of what I’ve learnt after researching the subject for almost 15 years. You can find Part One, here, if you are interested (subsequent parts link on from there). It covers most of what you’ve said in your comment, but I’ll respond to the individual points anyway.
1) I will pay a million euro for an authentic unicorn horn. This statement demonstrates how obviously ridiclous is the claim that demand generates supply. In reality the market can only meet a demand under a set of specific conditions; most obvious of which is that the product or service being demanded actually exists.
2) “We have an enormous amount of tar and shale”. This is true. However, a cursory examination of the subject demonstrates that they cannot compensate for the decline in conventional oil, and moreover there are some very serious problems with their use. I suggest reading A Crash Program Scenario for the Canadian Oil Sands Industry (a peer-reviewed study carried out by Uppsala University) which concludes…
The fact is; the production of oil from these sands cannot be done at anything like a rate fast enough to compensate for conventional oil decline. Beyond that, the ERoI of both sources (tar sands and shale) are far lower than that for crude oil. This objection, however, is greatly overshadowed by the problems of conversion. The process consumes vast quantities of fresh water and natural gas; both are themselves experiencing depletion. The process also produces huge quantities of toxic waste for which we have yet to develop a disposal solution.
I do not doubt that the tar sands industry will attempt to fill the gap left by declining crude supplies. Those who believe it will succeed, however, have not studied the subject in any depth.
3) Forgive me; but just as you cry “rubbish” at the notion of peak oil, let me cry “rubbish” at the notion of abiotic oil. Can you provide a figure for the quantity of abiotic oil commercially produced over the past 100 years? Let me save you the time. It’s zero. The Soviet claims to have found large deposits of the stuff have been thoroughly dismissed by modern petrogeology. The notion that large quantities of abiotic oil will suddenly be discovered is simply fantasy. The notion that it hasn’t been found yet because it’s “too deep” is also extremely suspect given what we know about the physical properties of oil and the depths, pressure-tolerances and temperatures at which it can form reservoirs.
Sorry, but abiotic oil as a solution to a peak in crude is utter nonsense. I suggest you spend a little time reading about the science of petroleum geology.
4) “By definition unlimited”. Again, that’s just a ridiculous statement. How can the production of anything be unlimited in a closed system such as the earth’s atmosphere? The requirements of algal growth are sunlight, carbon, water and a number of other elements. All of which exist in very definite finite amounts on this planet.
In reality, algae is just a trendy new form of biomass and it suffers from many of the same inherent limitations (the most obvious of which, given it’s significantly lower levels of embodied energy as compared with crude oil, is the sheer space required).
Like tar sands, market mechanisms will drive a large expansion of the biomass industry. And just like tar sands, this will prove utterly disastrous from an ecological perspective while at the same time failing to compensate for crude oil decline.
5) Yes, oil is an energy storage medium, but it isn’t “simply” an energy storage medium. It is one that was created millions of years ago requiring no effort from ourselves. Until recently it could be accessed with little or no energy expenditure and in truly enormous quantities. This makes it very different from almost every other energy storage medium you care to mention (with the exception of natural gas; itself expected to peak within the next decade and a half).
Rather than repeat myself on the nuclear power issue, let me just point you to Part Two of that aforementioned article. And highlight the fact that while uranium has the potential to generate a lot of electricity, it is (a) not going to come on-stream fast enough, (b) not a solution to our liquid fuels problem, and (c) not a substitute for the mind-boggling vast number of products (from plastics to paints to pesticides) we currently derive from crude oil.
I have no doubt that you could “keep going”, but I’m not sure there’s much point. You don’t seem to appreciate the science of petroleum geology nor the ecological effects of allowing market mechanisms to deal with peak oil. Furthermore, like most poeple, you appear blissfully unaware of just how uniquely valuable crude oil truly is and the level to which our civilisation depends upon it.
May 25th, 2010 | 6:46pm
by Jim Bliss
Hi Rob. My response to Neil probably says most of what I want to say about the ability of capitalism and the free market to deal with peak oil. In case you’re unaware, this is the blog of a man who profoundly disagrees with free markets as a way of running our world. In fact, my Master’s thesis essentially proposed (and I would suggest, demonstrated) that free markets are actually a form of psychosis within the collective mind of modern humanity (based on Gregory Bateson’s theories of schizophrenia and the psychodynamic model of the mind).
Part three of the article I referred to in my response to Neil contains some of my thoughts on the likely free market response to peak oil.
Summary: it won’t work and the failure will be disastrous.
May 25th, 2010 | 6:52pm
by Jim Bliss
Leaving aside our old friend, ‘peak oil’, you appear to neglect to address the key factor: oil’s myriad uses.
Of these, two – lubrication and aviation – are much higher value than other uses that account for the bulk of oil use – in particular, land transportation. Consequently, we can be pretty confident that the commercial aviation industry will continue to secure the oil it needs to serve its growing customer base.
Car owners may eventually have to look elsewhere for their energy supplies, but then energy density is less of an issue when you don’t have to lift the fuel itself into the air.
May 25th, 2010 | 9:16pm
by David Boycott
Hi David. Many thanks for your comment. I don’t believe I’m neglecting “oil’s myriad uses”. I just think we may not be in agreement on the issue
Lubrication is certainly high on the ‘value list’ of oil, but I don’t think aviation is anywhere close to the top. Ahead of jet fuel, I’d put food production (pesticides / fertiliser / agricultural equipment), food distribution (road transport isn’t just private cars), home heating, detergents, solvents, pharmaceuticals, high value plastic products (from computers to watertight films to paint to tyres to syringes and so on and on).
On top of that is the fact that the military consumption of crude oil products is huge (the US military is the single largest consumer of oil products on the planet).
So I figure there’ll be plenty of people and organisations ahead of the aviation industry in the queue. Furthermore, with regards to the private car, I suspect that — left to market forces — most people will sacrifice air travel to retain the use of their car for a while longer. People living in the communter belts will continue to drive to work even if it means cancelling their weekend break in Barcelona.
And ultimately, as oil prices rise, the notion of “cheap flights” begins to disappear and it’s the cheap flights that have created the massive expansion in aviation. As I’ve said elsewhere, I don’t think the aviation industry will disappear completely; it will merely see a radical reduction in size as air travel once again becomes a luxury. So when you talk of a “growing customer base”, I think you’ve got it completely wrong.
My own view is that private car usage will become a luxury soon after air travel. I don’t believe there is an adequate substitute for oil (on the scale we consume it), and don’t envision one being developed in the next ten years or so — which is my estimate for the timescale we’re looking at; in the sense that peak oil will have become clearly manifest by that point and people will be openly talking about being in the midst of “an energy crisis” or “an oil crisis”.
In fact, I believe we’ll hit that point by 2015. I’ve been predicting that date for the past 12 years or so, but always with a 5 year margin of error (given the complexity and sheer scale of the issue — the current financial crisis probably put the oil crisis back by a bit, but America’s military adventures probably brought it forward… there’s a hell of a lot of variables, so 2015 +/- 5 years is a reasonable estimate).
May 25th, 2010 | 10:23pm
by Jim Bliss