Airlines unite to recruit online soldiers for oil price battle

The airlines have had enough of high oil prices. In a remarkable alliance, United Airlines today joined with a host of other air carriers in an e-mail barrage to encourage their frequent fliers to write Congress and encourage it to act on what United called excessive, largely unchecked oil market speculation and manipulation.

Twelve airlines including Jet Blue, Delta, American, AirTran and others pinged their frequent flier constituency egging them on to get politicians to crack down commodities investors or speculators who have caused crude oil prices to soar, hitting $146 a barrel last week.

United's letter said in part: "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."

Congress for its part has really only paid lip service to the whole oil price situation. But at least some of that may change as the fall political season heats up. According to a CNNMoney.com report Congress has been debating four main issues: limiting the role of speculators, increasing domestic oil drilling, taxing Big Oil to fund renewables, and capping greenhouse gas emissions. The most likely scenario is one in which the Republicans back down, allowing increased regulation of energy speculators, and the Democrats give up some ground on domestic drilling, according to Congressional staffers and other analysts, the report said.

For some it's hard to muster any sort of sympathy for the airlines what with the ever-more frequent delays, lost luggage and constant nickel-and-dime fee increases for services that used to be free. It would be impossible to say the airlines are being hit any harder than say the trucking industry or the car manufacturers who are both struggling mightily under the weight of rising oil prices.

Certainly there is plenty of blame to go around for the oil issue. Chevron's CEO said rather high demand and a short supply of crude oil were key factors causing gas prices to spike. Despite record profits among major oil companies, he downplayed a recent Gallup poll in which Americans said corporate avarice played a role. Then you have OPEC's Secretary General recently saying the record-high crude oil price was unbearable. In a Reuter's story Abdullah al-Badri also called for measures to curb market speculation, a factor he said is sending prices to unjustified levels. Of course his main point was that OPEC is pumping more than enough oil and high prices reflect factors beyond its control.

Indeed many airlines are being hit hard. This week Northwest it cut 2,500 jobs as a result of capacity reductions taken to address the unprecedented run-up in oil prices. Air Canada recently noted that it took $68,948 to fill up a Boeing 777 for a flight from Toronto to London in early June. And the International Air Transport Association's (IATA) in June said 24 airlines have suspended operations or gone out of business in the past six months, as prices for crude soared 40%.

Here's a copy of the United letter

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 http://www.stopoilspeculationnow.com/

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