Oil prices put business travelers over a barrel

— -- Once upon a time air travel was a luxury reserved for the rich and famous. With sustained oil prices over $100 per barrel, we may be headed that way again, and the impact on business travel could be enormous, as cash-strapped airlines raise prices, cut capacity and try to squeeze alternative revenue sources out of the flying public.

A confluence of several factors increases the likelihood that oil prices will stabilize at current levels or worse, go higher still. According to the U.S. Department of Energy (DOE) oil consumption will grow by more than 40% over the next quarter century fueled largely by emerging giant economies in China, India and other rapidly industrializing nations. Refineries around the world are already operating at or near capacity. Even if refiners can boost future capacity, it is unlikely they can keep pace with demand.

Ten countries hold 85% of the world's known petroleum reserves. Eight of these are OPEC members. Even in the most congenial (and unlikely) future political scenario with no disruptions in the supply chain, oil producers have no incentive to boost production and sell their cash crop at lower prices as long as consumption continues at current levels.

In 2004, the world consumed 30 billion barrels of oil. By 2030, DOE projects annual world oil consumption will reach 43 billion barrels and continue to climb. At that rate, we will deplete existing oil reserves within the next 50 years without benefit from significant new oil field discoveries or development of alternative energy sources to curb the world's appetite for oil.

All this points to the fact that $100+ per barrel oil is here to stay for the long term. And at this price point only one major U.S. airline can make money in the short term, as a recent USA TODAY analysis reveals. Hedged at $51 per barrel for 70% of its 2008 fuel requirements, Southwest Airlines should be profitable this year even in the worst case scenario. But sustained oil prices over $100 per barrel will eventually affect Southwest's economics as their fuel hedges roll off in future years.