Oil on the Airline Industry - Research Paper Example

re – high demand and low supply leading to projections of increased fuel prices in the future, dependence on OPEC countries for fuel leading to change in political equations in the future, need for the airlines industry to look for better utilization of its resources to counter increasing oil prices and also invest in alternative green fuel. Fuel costs have become largest single cost component of the global airline industry reaching at 29% of the total operating costs in the year 2007 and 34% in 2008 as compared to 13% in 2001 as per IATA calculations (Conrady).

This cost further increases to 50% for budget carriers (wikinvest.com). These calculations by IATA are based on crude price of $73/b. With increase in this price, the percentage will increase even further. The future projections of fuel consumption and hence the prices are even more disheartening if we look at the figures projected by Energy Information and Administration (EIA). They have projected the world’s petroleum products consumption to increase from 84mb/d in 2005 to 113mb/d in 2030 with even more consumption in developing economies of Asia and Middle East (Conrady).

With the increase in demand for fuel there is a further threat from peaking out of oil reserves in Non-OPEC regions. 70% of the remaining reserves are hence located in OPEC countries. These countries are economically disturbed and also depend on their oil reserves for their economic growth as this sector represents a major part of their earnings. Because of this dependence on oil their predictions regarding their oil reserves is not very reliable as they will always give out biased information so as not to harm their financial and political prospects (Conrady).

It has been estimated that the airline industry contributes around 2% of the greenhouse gases and 11% of the total green house gases emitted by U.S. also (Stuijt). The industry has too much dependence on fossil fuels. This is the greatest threat to this sector. The