Jul 10, 2008 6:55 pm US/Mountain
Airlines To Consumers: Help Us Lower Fuel Prices
DENVER (CBS4) ―
The executives of 12 U.S. airlines sent an open letter to customers this week asking them for help lobbying Congress to regulate oil trading.
The letter said the removal or weakening of oil market regulations has led to more market speculation and manipulation.
Many people believe oil speculators are manipulating the market by buying oil now to sell later. That artificially raises demand and pushes up prices.
The airline executives say the "country is facing a possible sharp economic downtown because of skyrocketing oil and fuel prices." On Thursday the price for August oil delivery jumped more than $5 to more than $141 a barrel.
The open letter says in part that "20 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."
"That's gotta stop, and there is a way to regulate it," Rep. Ed Perlmutter, D-Colo., told CBS4. "It used to be regulated. Then it was deregulated. We have to step in because this has really disrupted the market."
The coalition listed the severe consequences the rising cost of fuel is having on the airline industry. Airlines have been forced to raise fares, cut thousands of jobs and scale back on flights to off-set the increasing cost of jet fuel.
Bankrupt Denver-based Frontier Airlines says since they can't do anything about supply and demand, Congressional help to rein in the oil speculators is critical. Frontier Airlines was not one of the airlines who signed the letter but they support the effort.
When asked if he's convinced the oil speculators are a major contributing part of the problem, Frontier Airlines spokesman Steve Snyder responded with the following words.
"I would say that from Frontier's perspective, we are looking for any help we can, whether it's a small part of the problem or a big part of the problem," Snyder said.
Denver financial expert Bruce Allen says to help the airlines, lawmakers need to close the so-called "Enron loophole" that was passed 8 years ago, eliminating most government regulation of electronic oil traders.
"No stock is traded without government regulation, no bond is traded without government regulation. No commodity should be traded, especially one as vital as oil is to the U.S. consumer, none of that should be traded without regulation."
"I think a more effective message is to ask your congressman to look at domestic engery supply and make sure we're developing our homegrown resources whether they be oil, gas or renewables," said Stan Dempsey Jr. of the Colorado Petroleum Association. "When they talk about speculators, speculation is when any of us choose to buy a stock or bet against a stock. That's speculation."
Along with cutting jobs and flights, airlines have made several smaller changes to cut costs and increase revenue. They include fees for checked baggage, asking pilots to fly a little slower to conserve fuel and new fees to use frequent flier miles.
Northwest, for example, will start charging as much as $100 to cash in miles.
The airlines' effort is supported by a group called S.O.S. Now (Stop Oil Speculation Now). The 12 major airlines formed the lobbying coalition with support from the Air Transport Association of America. The airline executives asked consumers to visit
www.StopOilSpeculationNow.com to help.
Additional Resources: An Open letter to All Airline Customers:
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.
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.
Robert Fornaro
Chairman,
President and CEO
AirTran Airways
Bill Ayer
Chairman,
President and CEO
Alaska Airlines, Inc.
Gerard J. Arpey
Chairman,
President and CEO
American Airlines, Inc.
Lawrence W. Kellner
Chairman and CEO
Continental Airlines, Inc.
Richard Anderson
CEO
Delta Air Lines, Inc.
Mark B. Dunkerley
President and CEO
Hawaiian Airlines, Inc.
Dave Barger
CEO
JetBlue Airways
Corporation
Timothy E. Hoeksema
Chairman,
President and CEO
Midwest Airlines
Douglas M. Steenland
President and CEO
Northwest Airlines, Inc.
Gary Kelly
Chairman and CEO
Southwest Airlines Co.
Glenn F. Tilton
Chairman,
President and CEO
United Airlines, Inc.
Douglas Parker
Chairman and CEO
US Airways Group, Inc.
(© MMIX CBS Television Stations, Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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