Despite doomsday predictions in a new film, and airlines having to increase fuel surcharges yet again, it may not be all bad news for passengers, reports Colin Ellson Cases of life and art imitating each other are rarely as pronounced as happened in late autumn this year. As oil prices reached a record US$97 a barrel, prompting airlines to introduce a new round of fuel surcharges, a film was released which warns of an oil apocalypse. Against a real-life back drop of rising costs caused by refinery bottlenecks, geopolitical problems in the Middle East, fluctuations in the US dollar, and the growing demands of India and China, A Crude Awakening: The Oil Crash claims that should there be a major slump in oil production – currently 80 million barrels a day – this will trigger worldwide recession and economic collapse. The movie shows stark images of rusting oil wells and fuel riots in Asia and Africa, scenes that would be repeated around the planet. "The world is facing changes more frightening than any horror movie," warn the film's makers. While some experts believe oil production has indeed peaked, others say it will within two years, either way giving credence to the movie's hypothesis. The oil companies, on the other hand, say there are still major reserves to be exploited, and in a strange paradox, global warming is freeing the Arctic and Antarctic of ice and snow, allowing exploration of vast untapped resources. OPEC, the Organisation of the Petroleum Exporting Countries, which controls the price of oil produced by its 14 Middle Eastern, South American, Asian and African members, is equally confident. Says secretary general Abdalla Salem El-Badri: "The Organisation strongly believes that fundamentals are not supporting current high prices and the market is well supplied. There has been no interruption in crude supplies. The rising oil prices which we are currently witnessing are largely driven by market speculators." Back in the real world, away from fictional doomsday scenarios, the abstruse arguments of economists and geologists, and soothing words, the airlines are among the major users of the fossil fuel, which accounts for up to 40% of their operating costs, and their priority is to contain surcharges within acceptable limits. To do this, they buy aviation fuel at the best price, either over the counter or on the futures market. British Airways, for example, whose fuel bill this year will be £2 billion (US$4 billion), has locked in the cost of 90% of its needs at some US$68 a barrel until the end of March 2008. But it has hedged only 45% from April to September next year at US$76 a barrel, with the remainder to be bought at prevailing market prices. Like its competitors, BA acknowledges that buying fuel is not an exact science and contains more than an element of luck. Meanwhile, in mid-November, the airline – which was fined US$540 million in August for colluding with Virgin Atlantic to fix fuel surcharges – raised those on flights lasting more than nine hours by US$60 to US$232 for a return ticket. Sub-ninehour trips went up by US$40 to US$192, and short-haul flights by US$8 to US$40. Also increasing their fuel surcharges, at differing rates, in late autumn were KLM, Aer Lingus, Virgin Atlantic, Singapore Airlines and Cathay Pacific, among others, while Emirates has abolished such levies, holding that they are part of an airline's operating costs and do not need to be shown separately. More transparently, Michael O'Leary, the outspoken CEO of low-cost carrier Ryanair, has announced it will never impose fuel surcharges, "even if oil hits $200 a barrel". Should that dire situation ever materialise, then the prospect of the oil apocalypse predicted in A Crude Awakening would draw alarmingly nearer. To date, however, there have been no riots by airline passengers faced with spiralling fuel surcharges, despite their swingeing effect on fares worldwide. While premium class passengers largely accept the facts of airline economics and the profit motive, and the sector is even on the increase, not surprisingly, there has been a dip in leisure travel. A family of four flying transatlantic to Orlando, Florida, for example, faces some US$800 in surcharges to the price of a holiday. But according to Guy Caruso, chief of the US Energy Department's statistical division, there is no need to panic and air fares should stabilise. "Oil prices are likely to fall at least another $10 a barrel by next year, to around $80 a barrel, based on assumptions about new supplies and limited growth in demand," he says. We can only hope that such predictions will prove correct, relegating the latest disaster movie and its ilk to an exciting but nonsensical flight of fancy on the airlines' in-flight entertainment systems. What you fork out for fuel British Airways
Long haul under nine hours: US$192 return.
Long-haul over nine hours: US$232 return.
Short haul: US$40 return Bmi
Long-haul: US$60 per sector.
Short-haul: US$32 return Cathay Pacific
Long-haul: US$54.90 per sector Japan Air Lines
Japan to Europe, North America (excluding Hawaii), Middle East, Oceania: increases from US$108 to US$141 per sector on January 1, 2008.
Japan to Hong Kong: increases from US$50 to US$62 per sector.
Japan to Korea: increases from US$16 to US$20 per sector.
Japan to China: increases from US$39 per sector to US$49 Singapore Airlines/SilkAir
Singapore to US and Canada: US$104 per sector.
Regional routes: US$24 per sector. All other flights: US$67 per sector Virgin Atlantic
UK to US East Coast, Caribbean, Africa, India,
Middle East: US$172 return.
UK to US West Coast, Far East, Australia,
South Africa, Indian Ocean: US$192 return
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