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October 1, 2001

The attack on the World Trade Center changed the nation's complexion more than it changed the facts. A piece of advice from the Vietnam-era protestors: try to disrupt the system by touching it where it almost breaks down by itself. Their suggestion for shutting down the U.S. government was to burn three junk cars, one each in the middle of three overcrowded intersections during the Washington DC morning traffic rush.

Whether by luck or by design, the Sept 11 attack came while the U.S. economy was trying to recover from the bursting bubble. The airlines, in particular, were suffering from a severe reduction in business travel. The pre-existing concern over the economy and the airlines was greatly magnified by the attack.

It isn't true that oil is the root of all evil, but a struggle for control of Middle East oil may be the underlying motivation for a terrorist attack on the U.S.A. (Paul Krugman gave a good summary on page A-19 of the Sept 26 New York Times.) Here's the motivation: What are next 200 billion barrels of Saudi oil reserves worth if the price of oil goes to $50 per barrel? Multiply it out, you get a one followed by 13 zeros. (Those are called Arabic numerals.) Saudi Arabia has long considered itself to be the standard-setter in the Islamic world, based in part on their stewardship of the holy cities. The Taliban and Osama bin Laden are trying to present themselves as the new standards for Islamic correctness. In that sense, Israel and the World Trade Center are peripheral issues. This is the new motto: IT'S THE OIL, STUPID.

Regrettably, the loss of the World Trade Center may have increased bin Laden's standing in the "Most Muslim" contest. Whoever planned the attack did about a million dollars worth of damage for every dollar spent. In terms of casualties, more than 250 people died for each dead hijacker. The terrorist attack may have won the battle, but eventually they will lose the war.

Although the spot price of oil increased for a few hours on Sept 11, the price has since dropped from about $25 to roughly $21 per barrel. This past week, OPEC announced that production would remain constant and the slightly lowered demand for world oil seems to have dropped the price.

My brother, Bob Deffeyes, brought out a point that I overlooked in Hubbert's Peak: The aviation industry is particularly difficult to wean from a dependence on oil. The Navy can build nuclear powered ships, the Army could drive vehicles on natural gas, but the Air Force is married to crude oil. For the airlines, the biggest change has been huge improvements in the efficiency of jet engines. Compression ratios, which determine the efficiency, started around 2:1 and have grown to 30:1. It isn't clear how much further the trend can go; a single jet engine for a passenger aircraft already costs more than a million dollars. Alcohol is not an attractive alternative.

I hate to suggest any change in the good 'ol American way, but it may be time to reinvent the airline industry "from the ground up". Instead of four major airlines slowly going broke flying almost-empty aircraft, we need a means of matching the capacity to the demand. Don't panic, I'm not a Marxist. We need some kind of Internet bidding. A flight could be proposed for next Tuesday from Philadelphia to San Francisco. If enough people sign up to fill the plane at least 80 percent full, the flight will go. There might even be some exciting bidding at the end with early passengers selling out their seats to last-minute business travelers. If there is a huge demand, bids would open on a second flight an hour later. It requires a huge, complex piece of software but I bet the trucking industry has already solved a similar problem.

One encouraging sign is the slow but sure return of our sense of humor. Letterman is back, Saturday Night Live is back, the Onion web site got 400,000 hits. Even the New York Times joined in: On Oct 1, their front-page headline reads "Bush Approves Covert Aid for Taliban Foes". "Covert" means "private, hidden, secret, disguised". How secret is it when the NYT announces it in 24 point type on page 1, above the fold?

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