Fuel Price History - PowerPoint PPT Presentation

1 / 34
About This Presentation
Title:

Fuel Price History

Description:

Fuel Price History – PowerPoint PPT presentation

Number of Views:1982
Avg rating:5.0/5.0
Slides: 35
Provided by: pacs3
Category:
Tags: airtran | fuel | history | price

less

Transcript and Presenter's Notes

Title: Fuel Price History


1
Fuel Price History
2
Fuel Price History
  • Crude oil prices behave much as any other
    commodity with wide price swings in times of
    shortage or oversupply.
  • The crude oil price cycle may extend over several
    years responding to changes in demand as well as
    OPEC and non-OPEC supply. 

3
Fuel Price History
  • In 1973 35 percent of oil was imported
  • In 2000 50 percent of oil was imported
  • 382.4 MillionThe number of gallons of motor
    gasoline consumed everyday in the United States.
  • 5,419,000The number of barrels produced everyday
    in the United States

4
Oil Prices over Past Year
5
Major Consumers of Fuel
  • US- 28
  • China- 8
  • Japan- 6
  • Germany- 3
  • Russia- 5
  • Rest of World- 53

6
Impact
  • 97 experienced price increases due to rising
    fuel prices
  • Mostly in inbound and outbound logistics
  • 54 of Co. are partially or fully increasing
    prices to their customers
  • Average fuel surcharge passed onto customer is
    25

7
Mode Consumption
  • Trucking- 51.4
  • Air- 13.6
  • Water- 7.8
  • Rail- 4.1

8
Impact on Trucking
  • Larger companies handling increase in prices
    better than smaller companies
  • Depends upon whether companies have fuel
    surcharges in place
  • Causing many small companies to go out of
    business
  • Trucking Co. in West Coast
  • Lack of drivers inc. in difficulty transporting
    goods inc. consumer prices

9
Impact on Air
  • After labor, jet fuel is the second largest
    operating expense for all U.S. airlines,
    constituting 10 to 25 percent of an airlines
    annual operating costs
  • Rising fuel costs led U.S. airlines to raise
    fares 12 times in 2005, and once so far in 2006
  • expected to post a 10 billion net loss in 2006
  • According to the ATA, at a consumption rate of
    19.5 billion gallons per year, every penny
    increase in the price of a gallon of jet fuel
    results in an additional 195 million in annual
    fuel costs for the U.S. airline industry

10
Impact on Air
  • Percent of Total Annual Fuel Requirement Hedged
    and Hedge Cost in 2006
  • South West- 70 _at_ 36 barrel
  • Alaska- 45 _at_ 40
  • Air Tran- 25 _at_ 56
  • Jet Blue- 16 _at_ 68
  • American- 18 _at_ 60

11
Factors Contributing to Price of Fuel
  • unexpected difficulties in refinery operations
  • new environmental regulations
  • sudden surges in regional demand
  • seasonal swings in demand due to weather and
    travel patterns
  • supply problems caused by natural disasters
  • geopolitical factors (i.e., the Iraq war and
    instability in other Middle East countries)
    market speculation

12
Effects of Changing Fuel Prices
  • Changes in oil prices have been associated with
    major developments in the world economy, and are
    often seen as a trigger for inflation and
    recession.
  • The increase in oil prices in 1974 and then again
    in 1979 were important factors in producing a
    slowdown in the world economy at a time when
    inflation was rising.

13
Reasons for Increased Prices
  • Oil prices have increased over 70 this year for
    three main reasons
  • There have been few new discoveries of oil in
    recent years there is greater demand for oil,
    especially from China, who is now the worlds
    largest importer of oil following the United
    States and there is uncertainty over oil
    supplies because of war and terrorism.

14
Why Fuel Prices should Concern You
  • In the past 30 years, higher oil prices were
    followed by recessions in 1973, 1981, 1990 and
    2000.
  • Higher oil prices have historically led to
    recessions because they act as a tax on spending
    by absorbing consumer dollars that would be spent
    elsewhere, by reducing corporate profits through
    increased costs and lower demand, and by causing
    higher inflation which in turn causes higher
    interest rates.

15
Effects on The Economy
  • Higher oil prices cause a supply shock that
    reduces GDP while simultaneously raising
    inflation.
  • The oil shocks of the 1970s and 1980s had a
    devastating impact on investors.
  • 10-year US Bond yields rose from around 6 to 15
    imposing losses on fixed-income investors.

16
Effects on Stock Market
  • Stock market investors also lost money.
  • For example, the Dow Jones Industrial Average
    lost nearly 75 of its value, after adjusting for
    inflation, between 1966 and 1982, its worse
    decline since the Great Depression.

17
Other Economic Sectors Impact
  • Increases in oil prices impact some economic
    sectors more than others.
  • Oil stocks, for example, have been breaking out
    to new highs for the past two years.
  • The airline and auto industries, which are
    heavily dependent on oil, have faltered during
    the past two years, just as they did in the
    1970s.

18
Continued
  • Internet retailers, such as Amazon, should
    benefit from higher oil prices because consumers
    wont drive as much as they used to.

19
Some Good News
  • Energy costs share of GDP has fallen from 8 in
    1973 to only 2 today.
  • The global economy relies more on services today
    than in 1973 and higher oil prices have made the
    world more energy efficient.

20
Inflations Effect
  • Although the current price of oil is at an
    all-time high, after adjusting for inflation, oil
    is still cheaper than it was in 1981.

21
Effects on Transportation
  • The United States consumes an average of 20
    million barrels of oil per day (according to the
    Department of Energy).
  • About 45 percent of that is used for motor
    gasoline. The rest is used for distillate fuel
    oil, jet fuel, residual fuel and other oils.

22
Historical Gas Prices(Adjusted for inflation)
  • Year Price Per Gallon
  • 19501.91
  • 19551.85
  • 19601.79
  • 19651.68
  • 19701.59
  • 19751.80
  • 19802.59
  • 19851.90
  • 19901.51
  • 19951.28
  • 20011.66
  • 20021.31
  • 20031.52
  • 20041.79
  • 20052.28
  • 2006 (so far)3.03
  • Source U.S. DOE

23
Result Of Higher Fuel Prices on Transportation
  • Higher Fuel Costs result in higher freight rates
    and they also result higher total costs
  • Airfares cost more due to increased Jet Fuel
    Prices
  • Fuel is inelastic (though it might be more
    expensive people still have demand for it)

24
Conclusions
  • The impact of higher oil prices on investors is
    likely to be less severe than in the 1970s.
  • Disruptions to oil supplies resulting from
    conflict in the Middle East are the primary
    concern for traders. This is the so-called
    terrorism premium that is built into the price
    of oil.

25
Conclusion Continued
  • The impact of higher oil prices on stocks and
    bonds should be limited, barring a severe
    disruption of oil supplies from the Middle East.

26
Alternative Fuels
  • Advanced Energy Initiative
  • The President has set a national goal of
    replacing more than 75 of our oil imports from
    the Middle East by 2025.

27
What are alternative fuels
  • Alternative fuels described here are those
    defined by the Energy Policy Act of 1992,
    including biodiesel, electricity, ethanol,
    hydrogen, and natural gas.
  • Non petroleum fuels

28
Ethanol
  • alcohol-based alternative fuel produced by
    fermenting and distilling starch crops that have
    been converted into simple sugars.
  • Produced in the US
  • Renewable fuel
  • Cleaner emissions

29
Methanol
  • also known as wood alcohol, can be used as an
    alternative fuel in flexible fuel vehicles.
  • methanol could possibly be the fuel of choice for
    providing the hydrogen necessary to power fuel
    cell vehicles.
  • several inherent advantages as an automotive fuel

30
Natural gas
  • produced either from gas wells or in conjunction
    with crude oil
  • consumed in the residential, commercial,
    industrial, and utility markets.
  • future holds great potential for natural gas

31
Biodiesel
  • domestically produced, renewable fuel
  • safe, biodegradable, and reduces serious air
    pollutants
  • biodiesel tax incentive
  • engine manufacturers are concerned about the
    impact of B100 on engine durability.
  • Some biodiesel produces more nitrogen oxides than
    others

32
Others
  • Hydrogen
  • -approximately 10-20 years for hydrogen vehicles
  • -technical and cost barriers.
  • Propane
  • -popular alternative
  • -cost of establishing propane

33
(No Transcript)
34
Future Impact
  • Alternative Fuel Impact (Positives)
  • Less demand for foreign oil
  • Future benefit of self dependency
  • Lower future costs

35
Future Impact
  • Alternative fuel Impact (negatives)
  • Infrastructure Costs
  • Low Availability
  • High initial costs
  • Equipment Problems
  • Training (Ex Drivers and Maintenance)

36
Future Impact
  • Is OPEC playing with the United States?
  • Consumer Responsibility
  • Plan for the future

37
Questions
  • 1. Which of the alternative fuels is an alcohol
    mixture?
  • A. Biodiesel
  • B. Ethanol
  • C. Natural Gas
  • D. Propane
  • 2. Which transportation mode consumes the most
    oil?
  • A. Trucking
  • B. Air
  • C. Water
  • D. Rail
  • E. None of the above
  • 3. Which one of these options are NOT obstacles
    in alternative fuel use by transportation firms?
  • A. Low availability
  • B. Future control of energy resources
  • C. New Infrastructure
  • D. High costs in the short run
  • E. None of the above
Write a Comment
User Comments (0)
About PowerShow.com