After thinking over yesterday’s announcement that Southwest is changing it’s Rapid Rewards frequent-flyer program, I was reminded of Southwest’s savvy negotiating of its oil contracts. Its keen ability to manage its fuel costs helped Southwest remain profitable through our last recession while its rivals collapsed into bankruptcy.
I also thought of last week’s analysis saying the surging worldwide demand for oil, driven by China’s voracious energy appetite, would likely result in nearly doubled gasoline prices by 2012. This is after gasoline prices doubled over the past two years. This week the average price of a gallon of gasoline on the East Coast is $3.07, whereas the price two years ago was $1.65 (and yes, I am fully aware that these prices will one day seem hilariously low).
I can’t help but think that Southwest, savvy fuel consumer that it is, is forecasting turbulence ahead for fuel-hungry industries like the airline industry. That’s what this Rapid Rewards change is really all about. The rah rah days of air travel are a thing of the past.
It’s widely agreed that the world cannot pump enough oil to meet current demand. Nor can more reserves be tapped to meet current demand. We have already reached a permanent seller’s market, with far more demand for oil than can be supplied.
With our overdependence on automobiles and aircraft, America will painfully soon regret its lack of investment in clean energy and effective mass transit, as other countries that have made those investments ride out the coming oil crisis far better than we do.