Getting airfares down: It's all speculation
As oil prices surge, airlines cut service, slap fees on anything they can
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Given the historic surge in oil prices, and its effect on airfares and airline fees, it's worth finding out if air travelers can do anything to save money by forcing oil prices back down.
With crude oil trading at $130 a barrel and up, airlines are bleeding red ink — see this week’s scary earnings announcements from American, Delta and Continental — and they are trying to recoup their losses by hiking fares and slapping fees on everything from checking bags to booking seats with a little more legroom.
The nation’s 12 largest airlines are fervently backing a new Senate bill, called S.3268, to rein-in speculation in oil futures. The carriers say a barrel of oil can change hands up to 20 times, adding $30 to $60 per barrel to the prices airlines pay for fuel.
Airlines say these stratospheric fuel costs are behind the wave of aviation job layoffs, the niggling, nickel-and-dime fees that passengers are finding tacked on to their ticket prices in ever-increasing numbers and amounts, and the big service cutbacks planned for summer’s end. One way to reverse that downward trend is to ground the oil speculators, they say.
There are no fewer than 11 bills in the House of Representatives and nine more in the Senate designed to squash speculation in petroleum markets by investment banks and hedge funds. (Fuel hedging by cash-strapped airlines would still be OK.) Bill number S. 3268, introduced by Senate Majority Leader Harry Reid (D.-Nevada), is the most prominent bill. Many sectors of the travel and transportation industry — airlines, airports, aviation unions, travel agents, truckers, FedEx and United Parcel Service — have joined forces to support it.
They want you to do so, too.
How? By becoming politically active, urging your senator or congressman to boost bills such as S. 3268, otherwise known as the Stop Excessive Speculation Act. The coalition behind S. 3268 has set up a Web site, StopOilSpeculationNow.com, to provide background and e-mail updates (info@stopoilspeculationnow.com). The campaign is being piloted by the American Air Transport Association, the airline industry trade group.
Not even its supporters think S.3268 will stop spiraling oil prices all by itself. But they maintain that, by enlarging the Commodity Futures Trading Commission’s staff and expanding its regulatory powers, Congress could stop Wall Street speculators and overseas traders from gaming the system. With lower fuel prices, airlines could restore some service and fares might level off, making flying friendlier and more affordable for business road warriors and vacationing families.
Whether this will actually happen is itself pure speculation. Economists disagree on how much of an impact speculation has on oil prices; some economists argue that soaring demand from China and India, political turmoil in oil-producing nations and ebbing supplies are more important in driving prices skyward than speculation is. Congress is just engaging in political posturing and looking for someone to blame, they say, and it would be better to develop renewable energy sources and kick our addiction to fossil fuels.
It’s far from certain whether S.3268 will become law. A squabbling Congress will have to pass it and former oilman George W. Bush, not known for hostility to oil industry profits, will have to sign it.
Interested? The full text of the bill will be posted online at http://www.govtrack.us/ ("Tracking the 110th United States Congress").
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