I received this via e-mail from United Airlines:
Last week, crude oil hit an all-time high of $146, and the skyrocketing cost of fuel is impacting our customers, our employees, the communities we serve, and the economy as a whole. United, and the majority of other major U.S. airlines, are asking our most loyal customers to join us in pushing for legislation to add more transparency and disclosure in the oil markets. Please see the attached open letter from the leaders of the U.S. airline industry.
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An Open letter to All Airline Customers:Â 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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Robert Fornaro
Bill Ayer
Gerard J. Arpey
Lawrence W. Kellner
Richard Anderson
Mark B. Dunkerley
Dave Barger
Timothy E. Hoeksema
Douglas M. Steenland
Gary Kelly
Glenn F. Tilton
Douglas Parker
A wise thing to do if they want to stay in business. I think the liberal environmentalists better shut their traps for awhile and let more rational minded people tend the store. Americans just can’t be paying more than $4 for a gallon of gas.
I know I’ve seen the public transportation mantra from SFL but let me just say that there are lots and lots of places in the U.S. where public transportation is not an option.
A wise thing to do if they want to stay in business. I think the liberal environmentalists better shut their traps for awhile and let more rational minded people tend the store. Americans just can’t be paying more than $4 for a gallon of gas.
I know I’ve seen the public transportation mantra from SFL but let me just say that there are lots and lots of places in the U.S. where public transportation is not an option and people have to get to and from work.
Many Eurosocialists look down their nose at the U.S. and wonder why we consume so much energy. Look at the scale, the sheer size of the U.S. compared to Europe!
I don’t agree with the proposal in the open letter asking for government intervention of the market. Speculators trade based upon the anticipated value of a commodity driven by supply and demand. India and China’s current and more importantly projected consumption of oil in addition to the weak US dollar and limited supply drives up trading.
The airlines are asking the federal government to regulate speculators is like asking them to limit the value Microsoft or GE shares can trade. As always the airlines continue to think short term. This is why they are in trouble. The correct answer which the airlines should support is for the US to adopt a balanced energy strategy recognizing we are competing with other countries for a limited supply of oil. The correct energy strategy would include opening AWAR and coastal regions to drilling (with effective environmental controls), build more refineries, invest in research to burn coal more cleanly, build nuclear power plants, and finally consider other forms of energy production such as wind and solar.
With limited regulation the markets will adapt. The environmentalists have prevented the US from sourcing huge supplies of nuclear, oil, and coal resources. We need a President and Congress who will support this balanced energy strategy. Unfortunately it appears we may get a President who will just add more regulation.
BonBon,
SFL is an idiot. Let him commute between Mason City, IA and Clear Lake, IA for work for one week without using private transportation. I doubt he’ll either be employed, be able to duplicate making it to work for another day let alone week, or be able to walk.
I live outside of DC and even I would have to drive 2 miles to catch the bus. Further logistical problems are the routes and the stops. Driving to work may take 30 minutes but the bus could take 90 minutes therefore making the bus a less than desirable option. Same goes for the metro. By the time you get to the station, get on your train, maybe having to change trains all adds up to unnecessary time.
I appreciate what the airlines are trying to do and am interested in how oil speculation enters into the picture. Its still a market system in the end.
Yes, not everyone has a commuting option. I’m 90 minutes, generally, sometimes less. NYC stinks but is basically reliable. My sister lives in a small city in the midwest where bus services stops after 6pm. We need a more comprehensive soltuion and it may be $5/gallon gas while electic cars are finally brought to market. About time since they’ve been in the pipeline since the 70′s.
NYD
Exactly David. There has been alot of different technology out there but as Robert pointed out the democrats have been opposed to most of it. I think it’s time now to pull out all the stops, get all the technology out there and use the ones that work the best.
Yo, Bon Bon, there’s nothing in the above letter about environmentalists. It’s about oil speculators. Maybe you need to take a course in reading comprehension.
BonBon,
You’ll have to stop caring about things that are “less than desirable” if you’re jumping on the environmentalist bandwagon.
This letter is a very narrow view of what their real problem is. Mismanagement of airlines which causes bankruptcy has been a problem for many for a long time, with or without rising fuel costs. Blaming the stock market is like blaming capitalism for the price of something. Our society runs on supply and demand logic. We love it when it works for us but hate it when it doesn’t. More often than not, it does work for us. This is a short term solution and I’m not even convinced it’s a solution. Taking the price of oil out of the hands of the people and putting into the hands of the government is a mistake. The extreme alternative is communism or less extreme is more government interaction in our lives. No thanks to either! Any time someone proposes to let the government handle something, my spidey sense starts tingling. The government should not handle the price of anything (well, except maybe war, and/or protection but that’s a different argument). Here’s a good (financially-minded but at times sarcastic) response to the letter:
http://www.fool.com/investing/general/2008/07/10/an-open-letter-to-all-airlines.aspx