It may sound a bit ridiculous for me to suggest traveling as much as possible during the next year or two, especially given rising fuel prices, but airline flights might not be this cheap again for a long, loooong time. Here’s why: The current, high price of oil is largely due to speculative "hedging". Southwest Airlines famously "hedged" their fuel prices by locking in the price per barrel they would pay with long term contracts and up-front payments back in the 1990s. Their success in doing this led other businesses that were also heavily reliant on fuel to do the same. But the possibility to turn a profit by locking in fuel prices quickly gathered the attention of speculators. Most of these speculators figured that once the two billion citizens of India and China began gulping down oil in western ways, the price would rise and, as any economist will tell you, once demand goes up, prices go up.
What the speculators see is two massive economies just now getting an influx of cheap cars. To them, that means the price of oil will rise much faster than interest rates, so speculating in the oil business suddenly becomes an attractive investment. The end result is that we're seeing a massive spike in oil prices now, that would have inevitably come anyway... most likely in five or ten years.
What does all this mean? Well, some good things. Firstly, high oil prices have rapidly accelerated investment, funding and development of alternate fuel sources around the world. Hybrid, fuel-cell and electric cars are already on the road in decent numbers but soon, nearly all of us will be driving one (perhaps within the next six or twelve years). If the western countries can cut down on gas consumption by that time, India and China may be quick to follow. Technology in both countries skipped entire generations as western technologies filtered their way overseas. India and China never used vinyl record players, 8-tracks or cassette players, instead going straight from no music to CD's and now MP3's. China has almost completely skipped film cameras, going straight from no cameras to digital and mobile phone cameras. Medical technology and research in Europe and the U.S. helped raise the average lifespan from 55-70 over the course of 100 years (1890 - 1990), but India and China achieve as much in three decades 1975-2005.
If the U.S. and Europe totally convert to hybrid, fuel cell or electric cars, India and China won't be far behind.
But what should be of paramount concern, in the short term, is impact this current price spike is having on the airline industry. There is virtually no development underway for alternatives to jet engines and there's very little investment into research for radical new fuel sources for jets. This means airplanes will still be oil dependent long after most of the world’s cars, trucks, buses, motorcycles, boats and scooters have all converted to hydrogen, electricity or bio-diesel.
The inevitable "price spike" of oil during the rise of India and China's increased consumption will be much worse than what we're currently experiencing. Not only will the future price increases affect the airlines but also anyone who still owns a gas-powered engine (think of the farmer and his tractors or the poor neighbor down the street who can’t afford to replace his gas-powered car). But obviously the most severe damage and cost crunch will occur in the airline industry because a flight from New York to Atlanta, for instance, requires more than 12,000 gallons of fuel.
Airplanes face much more severe weather and atmospheric conditions than cars. They fly at freezing temperatures in high altitudes and one of the problems with hydrogen fuel cells is that they don’t work in cold weather. A hydrogen cell's byproduct (water) would freeze in the high altitudes where commercial airliners fly. These are not the only difficulties of creating a new jet engine, but they highlight the severe differences in trying to create a workable new engine for a car vs. creating a new engine for a large, commercial airplane.
An alternative jet engine will eventually be developed, make no mistake, but given that there are (for all practical purposes) no developments currently underway for an entirely new engine, it’s obvious there's a lag time coming; a lag time between wheeled-vehicle conversions and airplane conversions. It’s been at least 20 years since the first prototypes of electric and fuel cell vehicles were viewed as feasible. But yet 20 years later electric cars are still just a tiny minority of cars on the road. Will it take 20 years to go from new prototype jet engine to worldwide adoption and usage? Who knows, but again, of greater concern is that there isn't even a pen-and-pencil mockup of a prototype to use in that prediction.
Creating an entirely new engine isn't the only problem however. The airlines are also well behind wheeled vehicles in alternative fuel research. Hybrid gas-electric, gas-ethanol and bio-diesel cars, though not a majority, have been driving on the roads in significant numbers for at least five years now. Meanwhile the world's first "synthetic fuel mix", commercial flight only just occurred in February.
With research at the beginning stages of synthetic fuel alternatives (that still mostly use oil) for airplanes, it looks like we’re heading for rough stretch for air travel in the near future. It may be as short as 10- or 20-years but could be as long as 30- or 40-years, where we're dealing with such expensive flights that they revert back to being a luxury of only the very rich. It's obvious that Airlines will still be using oil during the rise of Indian and Chinese consumption, and with the speculators currently raising prices, the Airlines are already facing contraction. The one major positive of this rising fuel demand is that whichever airline survives will be in good shape once India and China convert to non-fossil fuel cars (again, this is looking something like 20-years into the future). At that point, with gasoline consumption dropped to a minimum, jet fuel will be as cheap as flour. And the world's citizens can all go back to flying all over the place.
But until then, it's probably best to travel now, since the airlines are still maintaining low ticket prices while cutting services... these are not answers to their problems, by the way. They're just delaying the inevitable when the cost of fuel will have to be passed on to the passengers. Until then, travel now, while you can still afford to... (or, if an airline offers it, do like the speculators have done and "hedge" your future ticket prices).