It has almost become tedious to keep reporting new records in oil prices, as the price of a barrel of oil passed $135 today and motorists continue to gnash their teeth and tear their shirts over a global supply constraint that geologists started predicting in the late 1990s.
Nearly everyone else ignored the geological evidence for a near-term peak in oil production until very recently, and today it's still difficult to find a newspaper article about oil prices or gas prices that actually acknowledges the underlying supply situation.
Instead, populist pundits are calling for gas tax "relief", which won't lower prices but will leave us even less prepared to transition away from dependence on oil.
Prime Minister Stephen Harper sensibly rejected such calls, but he got his response only half-right. He also advocated cutting general taxes to "lower costs for consumers generally".
He cited the two point reduction in the GST as an example. However, that money would have been better spent investing in more sustainable public infrastructure, including higher order electric rail transit and mixed-use, walkable neighbourhoods.
In related news, American Airlines has announced that they plan to begin charging $15 USD to check in the first bag of luggage. The airline industry has already adopted a $25 charge to check in a second bag.
This is in addition to American's decision to cut main domestic seat capacity by 11 to 12 percent and regional affiliates' seat cpacity by 10 to 11 percent, with analysts predicting layoffs in the thousands as a result. American expects to retire "at least" 75 planes by the end of the year.
Gerard Arpey, CEO of AMR Corp, the parent company for American, explained the policy this way: "The airline as it is constituted today was not built to withstand oil prices at $125 a barrel, and certainly not when record fuel expenses are coupled with a weak US economy."
The bad news just keeps rolling in for the airline industry. While a few airlines, like British Airways, continue to perform well, many are struggling. Thai Airways' first-quarter profits are down 48 percent, TAM's profits are down 96 percent, Alitalia lost $333.1 million, and Air Canada lost $288 million while ACE Aviation Holdings struggles to dispose its 75 percent stake in Air Canada.
The industry trend is moving away from smaller planes with higher per-passenger operating costs and from flights to smaller regional destinations. Instead, the industry is moving toward a business model with fewer flights on very large vehicles (like the Airbus A-380 moving between large metro centres with high passenger traffic.
Over the longer term, long-distance intra-continental transport will likely shift away from aviation and toward modern rail.
The question is: will Hamilton notice this shift and adjust its long-term economic development plans accordingly?
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