Oil prices and cutbacks
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Oil prices and cutbacks
I hear on the news etc that oil prices have slumped recently. Anyone know if this is going to ease financial pressures at the airlines? When the price goes up it seems to cause problems, so is the reverse true as well?
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When I decide on how much fuel to load into my short haul machine I get to see the various prices. A wide variety around Europe exists. Some of the variation has additional logistical difficulties behind it. However, some of the variations are for other reasons. So far I have not yet noticed any reduction in the average price, though it will probably filter through in time.
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Actually, the price of oil is worryingly low for OPEC - but relatively great news for the rest of it as it more or less compensates for other increased costs.
At the time of the Gulf War, the price of oil doubled overnight, and only those airlines that had hedged their fuel purchases were able to control their costs.
Major airlines in Europe should be paying around 90 - 95 cents/USG on average with the smaller ones paying just over the dollar mark. Those prices depend on a lot of factors, including duties, into-wing fees and airport charges etc.
However, if there are any terrorist incidents in the Middle East - especially anything affecting the production or supply of crude - then all bets will be off and prices will skyrocket.
Meanwhile, here in the UK, don't expect to see much of the slump in petrol prices being passed along to the consumer - despite Gordon Brown's promises following last year's petrol protests he's done sod-all about reducing the amount of duties and taxes. Time for more blockades, methinks!
At the time of the Gulf War, the price of oil doubled overnight, and only those airlines that had hedged their fuel purchases were able to control their costs.
Major airlines in Europe should be paying around 90 - 95 cents/USG on average with the smaller ones paying just over the dollar mark. Those prices depend on a lot of factors, including duties, into-wing fees and airport charges etc.
However, if there are any terrorist incidents in the Middle East - especially anything affecting the production or supply of crude - then all bets will be off and prices will skyrocket.
Meanwhile, here in the UK, don't expect to see much of the slump in petrol prices being passed along to the consumer - despite Gordon Brown's promises following last year's petrol protests he's done sod-all about reducing the amount of duties and taxes. Time for more blockades, methinks!
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About 19.70 USD / barrell down from aprox 22-23 usd/barrell which i believe will not be for too long if OPEC go ahead with their decision to cut oil production and hence artificially raise the price again. The only countries (non OPEC) surprisingly!! that are not going to play ball are Russia and Norway.They already produce cheaper crude oil.So why should they cut production.
[ 07 November 2001: Message edited by: lets go nads ]
[ 07 November 2001: Message edited by: lets go nads ]
[ 07 November 2001: Message edited by: lets go nads ]
[ 07 November 2001: Message edited by: lets go nads ]
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Some of you guys seem to know lots about about fuel prices, so can you answer me this one. 'Hedging', if I've got it right, means that you agree a price with a fuel company for a certain amount of fuel or for a period of time so that, if prices rise, you continue to pay the agreed price until your agreement runs out. Does that mean that, conversely,- as now - you continue to pay the agreed (higher) price until your agreement ends? If so, then the current decline in fuel prices is not necessarily helping all airlines now. Any comments or info appreciated.
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mcdhu
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In simple terms, the way it works is this.
You think that the price of fuel might rise next winter, so you purchase options on an equivalent tracker product (eg No 2 Heating Oil which closely correlates the movement of jet fuel).
These options give you the right - but not the obligation to buy the product at that price at that future date. You'll pay a premium for the options - how much depends on the volatility of the market and the strike price.
When the time comes to exercise your options, if the market price is higher than the option value, then you're 'in the money' and you've made a profit. If it's lower, then you just let your options expire.
You then trade the No 2 for Jet with one of the oil companies on a porduct swap basis and you're 'A' for away!
To reiterate - if the market price is lower than the option price, then you just buy fuel on the open market. So no, the low price of fuel is great for everyone - except the oil companies!
You think that the price of fuel might rise next winter, so you purchase options on an equivalent tracker product (eg No 2 Heating Oil which closely correlates the movement of jet fuel).
These options give you the right - but not the obligation to buy the product at that price at that future date. You'll pay a premium for the options - how much depends on the volatility of the market and the strike price.
When the time comes to exercise your options, if the market price is higher than the option value, then you're 'in the money' and you've made a profit. If it's lower, then you just let your options expire.
You then trade the No 2 for Jet with one of the oil companies on a porduct swap basis and you're 'A' for away!
To reiterate - if the market price is lower than the option price, then you just buy fuel on the open market. So no, the low price of fuel is great for everyone - except the oil companies!
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Sorry Guvnor; you couldn't be more wrong about the retail price of fuel. Last year's protests were led and approved by the Stupid Tendency, egged on by their tabloid cheerleaders.
The only way to get Islamic thumbs off the West's windpipe is to start a serious attempt to cut the use of fuel to what we can reliably produce, without undue recourse to unstable regimes. At the moment, we are all aware of the new post 11/9 traumas, but we carry on driving huge, half- empty vehicles, and wasting precious gas on generating electricity while ignoring the coal that Britain is made of.
Cheap things are always wasted. We need much higher fuel prices to force economy in its use. The idiot poseurs going shopping in their 4.5 litre, V8, 5000lb 4 x 4s are doing Bin Laden's work for him.
Anyway, who says UK fuel is dear? I paid 68.9 p per litre today, which is about 17p less than the peak. Apart from supermarkets, French petrol ststions are nearly the same price as English ones, unless you use diesel of course.
Just for once, why don't we try lookig ahead by more than six months?
The only way to get Islamic thumbs off the West's windpipe is to start a serious attempt to cut the use of fuel to what we can reliably produce, without undue recourse to unstable regimes. At the moment, we are all aware of the new post 11/9 traumas, but we carry on driving huge, half- empty vehicles, and wasting precious gas on generating electricity while ignoring the coal that Britain is made of.
Cheap things are always wasted. We need much higher fuel prices to force economy in its use. The idiot poseurs going shopping in their 4.5 litre, V8, 5000lb 4 x 4s are doing Bin Laden's work for him.
Anyway, who says UK fuel is dear? I paid 68.9 p per litre today, which is about 17p less than the peak. Apart from supermarkets, French petrol ststions are nearly the same price as English ones, unless you use diesel of course.
Just for once, why don't we try lookig ahead by more than six months?
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Unwell_Raptor : The fuel protests were about reducing the unfeasibly large tax on fuel (taken by the Labour party). Not the price of oil. 
Quite a different matter.
Also, didn't coal become too expensive to get out of the ground, had to be subsidised, then most of the companies mining it went bust didn't they ?
Coal is also hard to stoke into a CFM56 B1.
I just saw a program on the TV with a guy running his diesel engined Mercedes on veg. oil. Perhaps that is the way to go ? He said that he used the old stuff from round the back of chip shops and then filtered the "bits" out of it. 300 quid to convert the car !!! Now that is surely the way to go.
In the end we will all go onto nuclear power anyway - once the other fuels are all gone. But whilst it's still there then someone is going to get it out of the ground and sell it.
Your nostalgic viewpoint made me smile when I read it. Good point about the V8's though - However they do look good.
68.9p - that's the cheapest I've heard of. Where is that then ?
Quite a different matter.
Also, didn't coal become too expensive to get out of the ground, had to be subsidised, then most of the companies mining it went bust didn't they ?
Coal is also hard to stoke into a CFM56 B1.
I just saw a program on the TV with a guy running his diesel engined Mercedes on veg. oil. Perhaps that is the way to go ? He said that he used the old stuff from round the back of chip shops and then filtered the "bits" out of it. 300 quid to convert the car !!! Now that is surely the way to go.
In the end we will all go onto nuclear power anyway - once the other fuels are all gone. But whilst it's still there then someone is going to get it out of the ground and sell it.
Your nostalgic viewpoint made me smile when I read it. Good point about the V8's though - However they do look good.
68.9p - that's the cheapest I've heard of. Where is that then ?
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InvalDel:
You say:
"The fuel protests were about reducing the unfeasibly large tax on fuel (taken by the Labour party)" -
following the policy started by a Tory Chancellor in response to an international treaty.
"Also, didn't coal become too expensive to get out of the ground"
Only in comparison with underpriced oil, which is a comparatively scarce resource.
"Coal is also hard to stoke into a CFM56"
My point precisely. Oil and gas, which have a high energy/weight ratio, and which will go through pipes, should be saved for tasks where nothing else will do. It is insane, on a long view, to burn it in power stations when coal is available (or at least was!)
"Your nostalgic viewpoint made me smile when I read it"
Nostalgia is looking back. I am looking forwards. We may all become less complacent if Saudi goes t*ts up, and we are all back to queueing round the block for 15 litres
"68.9p - that's the cheapest I've heard of. Where is that then ?"
Safeway, High Wycombe, today.
You say:
"The fuel protests were about reducing the unfeasibly large tax on fuel (taken by the Labour party)" -
following the policy started by a Tory Chancellor in response to an international treaty.
"Also, didn't coal become too expensive to get out of the ground"
Only in comparison with underpriced oil, which is a comparatively scarce resource.
"Coal is also hard to stoke into a CFM56"
My point precisely. Oil and gas, which have a high energy/weight ratio, and which will go through pipes, should be saved for tasks where nothing else will do. It is insane, on a long view, to burn it in power stations when coal is available (or at least was!)
"Your nostalgic viewpoint made me smile when I read it"
Nostalgia is looking back. I am looking forwards. We may all become less complacent if Saudi goes t*ts up, and we are all back to queueing round the block for 15 litres
"68.9p - that's the cheapest I've heard of. Where is that then ?"
Safeway, High Wycombe, today.
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Unwell_Raptor,
Old Gordie Brown did abolish the Fuel Price Escalator that the Tories introduced and raised petrol duty by far greater amounts than it would have been raised using the escalator.
Coal is too expensive to get out of the ground.
I am sure that it wouldn't be too difficult to build a jet engine that runs on coal dust.
Would it be possible to have a nuclear powered "jet" engine. I wold imagine that it would put an end to refuelling, tech stops and "unoffical" minimum fuel policies.
Old Gordie Brown did abolish the Fuel Price Escalator that the Tories introduced and raised petrol duty by far greater amounts than it would have been raised using the escalator.
Coal is too expensive to get out of the ground.
I am sure that it wouldn't be too difficult to build a jet engine that runs on coal dust.
Would it be possible to have a nuclear powered "jet" engine. I wold imagine that it would put an end to refuelling, tech stops and "unoffical" minimum fuel policies.
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Actually, South Africa's state oil company, Sasol, created a very successful oil-from-coal programme.
Well, I say successful - what I mean is that it worked. Unfortunately, the poor taxpayer was hit for a few billion rand in development costs as well as an 'equalisation tax' on regular fuel.
Still, I reckon that you could use the same process here and sell it tax free - and help out both consumers and the remnants of the coal industry!
Well, I say successful - what I mean is that it worked. Unfortunately, the poor taxpayer was hit for a few billion rand in development costs as well as an 'equalisation tax' on regular fuel.
Still, I reckon that you could use the same process here and sell it tax free - and help out both consumers and the remnants of the coal industry!
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Since I live under a flightpath for LHR, and under a couple of major airways, you will excuse me if I am less than enthralled at the idea of nuclear powered aircraft. 
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This thread is getting a little off topic, but didnt the Americans actually experiment with the idea of a nuclear powered bomber in the 50s/60s, something to do with the Convair B36 if I recall correctly? Maybe someone infinitely more knowledgable about such trivia can comment...
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Not only does the price to the end user fluctuate with the price of a barrel of oil, it very much depends on how much the organisation supplying the fuel at the airport actually uses.
At my place, until recently, the airport authority supplied the fuel to all users, the cost remained relatively high because by comparison, we sold a lot less fuel than bigger airports.
Recently they contracted out the whole operation to one of the UKs major suppliers of avaition fuel, and guess what, the price to non contract users at the airport has remained the same, despite recent price reductions in oil prices.
Basically, the oil/fuel suppliers have us by the short and curlies, and unless you are a major customer or there is significant competition nearby, they can and will charge what they like.
At my place, until recently, the airport authority supplied the fuel to all users, the cost remained relatively high because by comparison, we sold a lot less fuel than bigger airports.
Recently they contracted out the whole operation to one of the UKs major suppliers of avaition fuel, and guess what, the price to non contract users at the airport has remained the same, despite recent price reductions in oil prices.
Basically, the oil/fuel suppliers have us by the short and curlies, and unless you are a major customer or there is significant competition nearby, they can and will charge what they like.
