Big Beer Belly
Well-known member
- Joined
- Nov 5, 2004
- Posts
- 756
Jim Smyth said:IMO there is only one way out of this for us "all". That is either gas has to come down to a reasonable dollor amount per barrel so we can all enjoy a profit and a decent job or the fairs have to go up to compansate for the gas increase. There is no other way. We made a profit in the fourth quarter only because of fuel hedgeing or we would have joined the group of others bleeding red.
Nice post Jim. Unfortunately, I (and many energy analysts) see oil remaining at approx $50/barrel and perhaps more for the foreseeable future due to increasing global demand (primarily from India and China). With refineries operating in the high 90's% of capacity, even if the producers turned the spigot wide open the bottleneck is really with the refiners (low margin/high capital cost end of the oil biz). My gut also says that if oil does come down, the LCC's, the bankrupt carriers and the Legacies themselves will simply lower fares to even further irrational levels in an attempt to fill the increasing number of seats that most all the carriers are adding to the market. I have never seen the supply/demand curve so out of whack ... and getting whackier! Econ 101 dictates that SUPPLY (aircraft seats) MUST BE REDUCED in order for prices to increase. The current situation cannot be sustained. When the inevitable painful shakeout (read multiple liquidations) finally occurs, the real question will be how badly the survivors got hurt (financially, stock price, credit rating, debt level, etc...) in the brawl.