By Jacquie Kubin, Donne Tempo Magazine
Washington, DC (July 10, 2008)… As industries go, the airlines are the one most obviously hit by the escalating price of oil. And believe it or not, the presidents and CEO’s of one of the most competitive industries are working together to bring attention not only to rising oil prices, but what can be done about them.
“It is a very serious problem with what (rising) oil prices have done already – we have seen the elimination of close to 30,000 jobs from the airline industry alone and hundreds of planes are being grounded as capacity reductions take place,” said John Meenan, Executive Vice President and COO of the Air Transport Association (ATA). “With these capacity reductions over ninety communities that have previously received air service will be losing that service.”
John Meenan, Executive VP and COO, Air Transportation Association (Photo courtesy of ATA)
And with the loss of airplanes in the air, comes the closing of airports, the loss of jobs on the ground and in the air, the loss of tourism dollars, and higher shipping fees. The cost could quickly become enormous.
But what is fueling these escalating oil prices. The price of a barrel from mid-eastern oil fields is a starting point, however the ATA, and the air service industry, is also placing a lot of the blame squarely on the shoulders of the speculative oil traders who can trade the same barrel of oil dozens of times, adding cost with every trade, before it is purchased by the end user.
Whether that end-user is the airline fueling a plane or you fueling your Subaru at the local gas station. The premise is that the largely un-monitored oil futures market is adding anywhere from a few dollars to more than fifty dollars per barrel.
Helping the public to better understand this issue, the ATA has launched Stop Oil Speculation Now and has announced a press conference, tomorrow, July 11th at The National Press Club.
But even more surprisingly, they have had twelve of biggest airlines – Southwest, United, US Airways, Northwest, Midwest, Jet Blue, Hawaiian, Delta, Continental, American, Alaska and AirTran – sit down and sign the same letter asking their frequent fliers to “pull together to reform the oil markets and solve this growing problem (see the letter I received here).”
This is an industry that thrives on competition; they are often cut-throat, and they are working together to promote the very human face of oil speculation. I never thought I would see the day.
Ergo, it may be getting colder.
“No one is against a free market, but what is generally termed the “Enron Loophole” has opened the gates to allow unchecked commodity futures trading,” Mr. Meenan said. “The price at the pump is not reflective of supply and demand, it is a result of speculation.”
The ATA maintains that Congress needs to step in and give specific directions on closing loopholes, increasing margin requirements and enhancing the transparency on how this business is being done.
Mr. Meenan stated that while continuing to explore alternative energy sources, practicing conservation and continuing to drill for more oil are all long-term solutions, legislation could be enacted fairly quickly to stop the unchecked commodity speculation which would lead to reductions, possibly extremely significant, at the pumps – both on the tarmac and around the corner.
“We are not saying that there should be no speculative market, but there is a difference between those who would want to hedge fuel prices and those who influence the speculative market, trading barrels back and forth relatively unchecked, driving up the costs,” Mr. Meenan said.
Jacquie Kubin, Donne Tempo Magazine, seeks, as most do, answers to higher oil prices that effect not only her travel schedule, but her weekly budget.