Airlines Hammer Oil Investors
Airlines continued to press their case against oil speculators on Friday morning, urging Congress to crack down on investors operating in the commodities markets.
The Stop Oil Speculation Now coalition, a lobbying group of a dozen major airlines run by the Air Transport Association, held a press conference with representatives from the Air Line Pilots Association, the International Brotherhood of Teamsters, and the Regional Airline Association to push for new regulations governing the trade of oil and agricultural futures.
This week, several airlines e-mailed their passengers asking them to demand that Congress pass new restrictions on speculation.
“There is no question that the airlines have asked for a lot over the years and there is a bit of airline fatigue on Capitol Hill,” said James May, CEO of the Air Transport Association. “But we’re not asking for any special favors…all we are asking for that there is national energy policy directed at bringing oil prices down.”
Over the past few years, institutional investors like hedge funds, pension funds, and university endowments have increased their holdings of oil and agricultural futures as a way to hedge against inflationary pressures and a falling dollar.
The investors bet on the future price of oil -- a strategy that yielded substantial returns as prices skyrocketed.
The financial services world weren’t the only ones to benefit from some savvy investing strategy. Southwest Airlines also hedged its oil bets, locking 70 percent of its fuel needs at $51 a barrel. Today, the airline pays about $2 gallon for jet fuel.
Nevertheless, Southwest joined the airlines, presidential candidates, and some congressional Democrats to argue that that the investor influx into the oil market inflated energy prices for consumers.
Democrats in Congress has introduced about a dozen bills imposing a host of new regulations on oil investors. But since the July 4 recess, much of the momentum seems to have stalled.
Regulators and the administration remain unconvinced that institutional investors are having an impact on prices. This week, representatives from the Department of Transportation said they saw little evidence that speculating has drive up the cost of oil.
That didn’t stop the airlines from pressing their case.
“The current Department of Transportation has demonstrated a lack of expertise in a number of areas. This is just the latest,” said May. “The only people arguing against trying to place to regulation on these markets are people making money on it today.”