Update: July 16, 2022
I could say I was prescient…..or not. I wrote this article in October 2021, and I did not foresee Russia’s invasion of Ukraine and Germany’s withdrawal of support for Nord Stream 2 due to the war. But the basic tenet of Russia ( and OPEC) using gas and now oil supplies to threaten world economic recovery and, therefore, that of the travel industry is more pressing than when this was written. Economic recovery from shutdowns, government COVID spending, and supply chain disruptions will depend in a huge part on energy prices. Sanctions have not hurt Russian oil revenues. Today, they are making 15% more on oil exports than they did a year ago, so there is little incentive to pump more. President Biden’s recent trip to Saudi Arabia and the GCC meeting will hopefully help moderate oil pricing. But we will have to wait and see. Here we are again, right back in 1973, no gas lines but prices way above what they were then.
The original article, October 2021:
Watching the daily number of COVID cases and holding our breath that we don’t hear about a new dangerous variant have become daily routines for all of us in the travel industry. Could there be a bigger threat coming this winter to recovery?
Nord Stream 2. If you haven’t heard of it you will. Energy supplies are already tight around the world, and they could be getting much tighter and exorbitantly expensive. Bear with me, this really is about the recovery of the travel industry
When I took my oral exams to get a Master of Science degree from Georgetown University, I was asked one question. What do you know about the Soviet (it was 1984) gas pipeline by a panel of State Department experts? In one of the luckiest moments of my life, I could describe its implications and the diameters and exact paths it would take. Most importantly, I added the geopolitical implications for the world. Why lucky? I had just finished drafting a chapter for a book on this very subject for one of the Directors of the Export-Import Bank during my internship there. The same info may serve me equally well in my current career of promoting the recovery of international travel for over 11,000 expert travel advisors. It’s all about energy again.
Just as air traffic is recovering and all are predicting a boom in international travel, we are also facing a current shortage of physical energy commodities (oil, gas, and coal). Unlike the PPP loans and government assistance to get us through COVID, you can’t print the oil we would need to replace gas supplies.
President Putin has promised to provide more gas immediately through the original Nord Stream pipeline (opened in 2011) that flows from Russia (Vyborg) to Lubmin in Germany to ease a tight market in the EU if the EU approves Nord Stream 2 (which will follow roughly the same path.) Nord Stream 2 will allow Russia to provide more gas to Europe, mainly Germany, bypassing Ukraine and Eastern Europe, where current pipelines now flow. Ukraine and Eastern Europe fear that this would allow Russia to strangle them by cutting off fuel supplies, so they are urging the EU not to approve.
Geopolitics and Travel
So how does all this geopolitical positioning impact travel? You already guessed, if the EU does not approve Nord Stream 2, and Russia does not provide more supplies through the first pipeline, or worse, reduce supplies, this winter will see soaring (and I mean soaring) energy prices all over Europe, the UK and in the US.
Energy prices impact everything we consume, from production to delivery. The US will not be immune from the impact of Europe’s troubles even though our domestic production has increased. Inflation will soar, and the cost of jet fuel will raise the cost of flights. Shortages may cancel more, and it will trickle down from there to every sector of the travel industry and daily life.
So here we are again. Back to the future of 1973, it might be Russia, in addition to OPEC this time, who holds the cards. My original career focussing on the geopolitics of energy collides with my current work of promoting the recovery of the travel industry post-COVID. Keep an eye on it. I think energy prices, not another COVID variant are our biggest threat this winter.
2 thoughts on “Could Energy Costs Replace COVID as the Biggest Threat to Travel’s Recovery?”
I appreciate your insight and friendship Jean
Same here Bill. I just wrote to Trearty about my fond memories of our Arabian Gulf World Leaders cruise. What a fabulous adventure that was.