Marketing Review — Summer 2008 - (Page 34) TRENDS Energy 30 31 The world used only 57 million barrels of oil per day in 1973, when the first major price shock hit. By 2004, it was using 83 million barrels daily, according to the U.S. Energy Information Administration. Consumption is expected to reach 97 million barrels daily by 2015 and 118 million by 2030. Much of this increase will be due to China, which is the second-largest user of oil in the world, and the fastest growing. ASSESSMENT: Nothing is likely to reverse this trend in the next 25 years. IMPLICATIONS: Oil prices now are high enough to provide an incentive to develop new fields, such as the Arctic National Wildlife Refuge and the deep fields under the Gulf of Mexico. Environmentally sensitive areas will be developed using new drilling techniques, double-walled pipelines and other precautions, that make it possible to extract oil with less damage to the surroundings. Any prolonged rise of oil prices to triple digits will erode support for environmental protections in the United States, leading to widespread development of whatever energy sources are most readily available, regardless of the long-term consequences. IMPLICATIONS FOR HOSPITALITY AND TRAVEL: For airlines, the rising price of oil has become a crushing burden. This more than any other single factor has driven the wave of industry consolidation in the last few years. It will continue to do so until prices stabilize. For other hospitality and travel operators, energy costs represent a relatively small expense—significant, but much less so than staff paychecks and benefits. High oil prices are a problem that most of them can live with, at least temporarily. 34 30) Despite efforts to develop 31) Contrary to popular belief, the alternative sources of energy, oil world’s confirmed oil supply is consumption is still rising rapidly. growing, not declining. As a result of intensive exploration, the world’s proven oil reserves climbed steadily since the 1980s and now hover at over 1.3 trillion barrels. Natural gas reserves stood at about 6.2 trillion cubic feet in 2007, about 1 percent more than a year earlier. Recent discoveries of major oil fields in Canada, Brazil, and under the Gulf of Mexico have substantially increased the world's known oil reserves. ASSESSMENT: Talk of “peak oil,” the suggestion that crude production has topped out, or soon will, is unjustified and, in FI’s view, unjustifiable. Our best estimate is that the world has used about one-fourth of its recoverable oil, and almost certainly no more than one-third. This trend will remain intact until at least 2040. IMPLICATIONS: Higher oil prices should make it cost effective to develop new methods of recovering oil from old wells. Technologies already developed could add nearly 50 percent to the world’s recoverable oil supply. OPEC will continue to supply most of the oil used by the developed world. According to the U.S. Department of Energy, OPEC oil production will grow to about 57 million barrels of oil per day by 2020. Russia and Kazakhstan will be major suppliers if the necessary pipelines can be completed and political uncertainties do not block investment by Western oil companies. Russia will grow into the world’s second-largest oil producer by 2010. Alternative energy sources face problems with economic viability. Barring substantial incentives, this will inhibit efforts to stem global warming for the foreseeable future. A generalized war in the Middle East after the United States 55 TRENDS FOR TRAVEL & HOSPITALITY • SUMMER 2008
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