Airline lobbyists

Posted at 3:37 PM on July 10, 2008 by Bob Collins (2 Comments)
Filed under: Northwest Airlines

Yesterday, Northwest Airlines whacked its frequent flyers over the head with a $25 charge for redeeming miles. Today, the company -- and other airlines -- asked for their help in a lobbying campaign.

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. Visit www.StopOilSpeculationNow.com.

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.

Perhaps the public should charge the airlines a $25 fee for doing so.

There is, of course, plenty of debate about the role of speculation in the run-up of oil prices.

"If by some chance the speculators and manipulators are correct--that oil prices could go even higher, based on supply and demand--then they will have done all of us a favor by ringing the alarm bell. High prices today are inciting suppliers to produce more oil and consumers to use less, which will ease the transition to a future of costly energy," BusinessWeek economics editor Peter Coy wrote this week.

Comments (2)

Didn't Southwest Airlines benefit a lot from oil speculation (until recently)? I remember hearing that part of the reason they were doing so well a few years ago was they had bought a bunch of long term oil futures contracts as low prices. They couldn't have done that without a market of speculators to buy from.

Posted by brian | July 11, 2008 7:41 AM

The leaders of the “major” airlines simply have had no idea how to ever make money in a deregulated environment. Finger pointing is the last defense of the incompetent. We can only expect things to worsen for all of us dependent upon air carriers. read more at http://www.ThePHoenixPrinciple.com

Posted by adam hartung | July 11, 2008 4:03 PM

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