Oil prices, cost of flying and tourism

If sustained, the recent startling increases in the price of oil will have a severe impact on the tourism industry. BA has said that at current oil prices it will make no profit next year, and warned that many airlines will go out of business (indeed some already have). It remains to be seen how much of the price rise is due to basic laws of supply and demand, and how much is due to speculators but most commentators are not predicting a sharp fall any time soon.

Every airline will eventually be forced to pass on these costs increases to passengers via higher ticket costs. We've seen this already with surcharges but there is much more to come. Flying will become more expensive, and this will hit the family of 4 looking for their summer break hard if not the luxury traveller for whom flying will see be relatively cheap.

While many travellers will bemoan this the prices rises do have two consequences which might in the long term not be at all bad

1. It makes people think harder about whether they really need to fly (we are believers in flying less, and when you do fly booking a holidays that does more good in the destination)

2. It creates even more economic incentives for the creation of an alternative to kerosene - aviation fuel.

That might not comes as much consolation for the average family, but its what needs to change in the future.