Airline CEOs release open letter blaming oil prices on speculators
Yesterday, CEOs from some of the 12 biggest airlines in the country co-released an open letter to the public regarding the current state of fuel prices. While the letter mentioned conservation and increased production in one sentence, the main point of their message was to encourage increased regulation of market speculators, whom the airlines assert could be responsible for as much as $30 to $60 per barrel in unnecessary increased costs.
While market speculators have recently been a popular target for politicians looking to appear responsive to the public’s concerns over high gas prices, it is not entirely clear that speculation is a major contributor to the current state of oil prices. T. Boone Pickens, billionaire oilman, and modern pioneer in the quest to develop renewable energy sources, asserts that investigating market speculators as the cause of the current state of oil prices is a “waste of time.” This is because, as Pickens explains, “you have 85 million barrels a day of oil available in the global energy market and 86.4 million barrels a day of demand. So the price of oil is going to go up until you can kill demand.”
In our opinion, regardless of whether speculators are a major factor in current oil prices, or not, the more focus that politicians and private leaders, like airline CEOs, place on them, instead of on conservation and development of alternative sources of energy, the more we miss the chance to make real changes. Instead of blaming “market speculators,” public and private leaders should be following the lead of Pickens, and taking positive steps (like his $10 billion wind farm in Texas) to actually decrease our reliance on fossil fuels.
The text of the letter from the airlines is copied below, and was signed by the CEOs of the following airlines: Northwest Airlines, AirTran Airways, Alaska Airlines, American Airlines, Continental Airlines, Delta Air Lines, Hawaiian Airlines, JetBlue Airways, Midwest Airlines, Southwest Airlines, United Airlines and US Airways.
AN OPEN LETTER TO ALL AIRLINE CUSTOMERS
Hello Sir/Mdm,
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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