HEINDRICK SO

Everyone hates rising fuel costs, and the Bay Area is certainly no exception. Any time there is a national average published, Bay Area residents can expect to be well above those averages. Well, airlines have certainly felt the hurt and aside from raising fees and stricter weight limits, they are now pulling together to regulate oil speculation. Their argument is that oil speculation should be more heavily regulated because so many middlemen are involved that by the time oil reaches consumers, it has inflated the price of commodities with respect to marketplace demands.

While there is no quick-fix solution to this economic crisis, this is one step that I think most can agree on. It’s also interesting to note that even Southwest has signed the letter, keep in mind that they have successfully hedged their oil well below what the other airlines are paying and stand a great chance to crush their competition. In a way, they are guilty of speculating themselves and have been able to dominate the niche of cheap fairs (currently $59, used to be $29/$39).

To sum the letter up, they are pushing to avoid oil speculation by investors/individuals who have no plans of even owning/using it. Here is the full letter from the 12 major Airlines, and signed by their CEO’s.

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.

Here is the link to the full official PDF Letter