If you are a member of a U.S. airline frequent flyer group, many of you may have received a message that looks something like this in the last couple of days. This particular message was sent out by United.
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An Open letter to All Airline Customers:
Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.
For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers. Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.
Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.
Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.
The nation needs to pull together to reform the oil markets and solve this growing problem.
We need your help. Get more information and contact Congress by visiting www.StopOilSpeculationNow.com.
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The letter was then signed by the Chairman and CEOs of all the U.S. major airlines.
Who’s behind this effort?
The Air Transport Association.
A couple of weeks ago I took the ATA to task for whining to Congress about this issue in PlaneBusiness Banter.
But apparently somebody still thinks it is a good idea for the airline industry to play the role of “victim” and cry that “speculators” are running up the price of oil. This means that many who receive this message will now assume that if Congress would just DO SOMETHING about this — the problem will go away.
Hogwash.
I’m sorry folks, but one, even if Congress were to pass tighter restrictions on energy traders, that is not going to stop the free markets from working as they always have. Secondly, rampant speculation is NOT what is causing oil prices to rise.
Finally, as a report on NPR the other day noted, just who are these “speculators?” Evil Wall Street types who like to “prey” on defenseless industries and the American public?
Not hardly. According to their research, pension funds, yes, maybe yours if you even have one left (and considering you may work in this industry that is a big assumption) have bulked up on energy contracts big time, to the tune of a triple digit increase in the last 5 years.
Why? Maybe it is because they thought it would be profitable.
Duh.
Of all the problems affecting this industry that cry out for leadership — ATC issues, overcrowding in the skies, slot restrictions, tax issues, and of course, the ongoing saga of the FAA — the ATA has decided that this one is the one that is so dire that it has enlisted the air of their respective members — and their members have now taken the straw-man “crisis” to the traveling public.
And then the industry wonders why Congress and those in Washington don’t take the industry seriously.
Technorati Tags: airline CEOs, airlines, oil prices, Air Transport Association, United Airlines
