COX NEWS SERVICE
December 1, 2004
WASHINGTON - We have an economy built around the open road and endless sky. We count on trucks to transport our goods, cars to get us to work and airplanes to whisk us to vacation spots.
But a growing chorus of experts says the age of cheap gasoline, diesel and jet fuel will come to an end - and soon.
If that's true, then America's transportation-dependent economy could be headed for a crippling crisis in coming decades. The federal Department of Energy projects that even 20 years from now, the nation's transportation sector still will fill nearly 97 percent of its energy needs with oil.
The best approach to the oil crunch is: "Do everything all at once," said Matt Simmons, chairman and chief executive of Simmons & Company International, a Houston-based investment banking firm that specializes in energy companies.
He believes Americans must find whatever oil is left, use it as efficiently as possible and make sure it is being used where it's most needed - for transportation, not heating or industrial purposes where substitutes, such as coal or renewable fuels, could serve as well.
"Doing everything" would help buy time while engineers focus on the long-term solution, which is to "invent a new energy source that does not exist today," Simmons said.
Engineers already are working on ways to improve the wind turbines and solar panels that help provide electricity and heating. Auto companies are making progress on developing and selling hybrid cars that get great mileage.
But engineers are far from developing any good way to lift a Boeing 757 off the ground or hurl a loaded Mack truck down the freeway without burning lots and lots of oil.
Because fuel is the second biggest cost for both industries after labor, they are under intense financial pressure to adapt to what may be a new age of more expensive oil.
"We're stuck with jet fuel," which the industry burns at a rate of 18 billion gallons a year, said John Heimlich, chief economist at the Air Transport Association, a trade group for airlines. Even looking ahead 30 years, he sees no realistic alternatives for flying without oil.
At the same time, he agrees with those who say the era of cheap oil is over.
Heimlich said that for U.S. airlines to break even, oil prices must remain below $31 a barrel.
During the decade between 1992 and 2001, the median price of a barrel of oil was $20, allowing airlines to pile up profits. Today, a barrel costs about $49, nearly 50 percent more than a year ago.
"I think we'll see some price moderation in '06 and '07, then we'll resume an upward path," Heimlich said.
To help reduce fuel costs, air carriers are slowing cruising speeds, buffing out fuselage scratches to reduce drag, removing unneeded galleys, carts and drinking water, as well as increasing use of single-engine taxiing and developing better flight plans.
They would like to aggressively replace old equipment. Replacing an old DC-10-40 with a new 757-300 can reduce fuel consumption by about half.
But the irony is that today's soaring fuel costs are making it more difficult for carriers to upgrade equipment. Both UAL Corp.'s United Airlines, the country's second-largest airline, and US Airways Group Inc., the seventh largest, are in bankruptcy. Virtually all carriers are reporting losses.
The trucking industry is also trying to adapt to expensive oil. In the past year, diesel fuel prices have risen about 65 percent. To help in the short term, many truckers have been imposing fuel surcharges on customers.
But to cut fuel consumption, trucking experts say companies will have to make many changes, from design modifications that reduce drag, training drivers how to stretch fuel, and simply slowing down.
Truckers must learn to conserve oil-based fuel because "I don't see any alternate form (of energy) coming any time soon," said Tavio Headley, staff economist with the American Trucking Associations, a trade group.
Sam Shelton, an associate professor at Georgia Tech University's Woodruff School of Mechanical Engineering, is trying to find ways to stretch oil supplies. He heads the university's new Strategic Energy Initiative, a program intended to carry out research, development and demonstration projects involving new technologies to replace oil or at least extend its use.
He believes increasingly scarce oil supplies should be channeled into the industries that truly need them. "Oil should be saved for the transportation sector" because the "energy density" of oil is needed to move heavy loads, he said.