United Airlines Letter to Customers on Oil Speculation

Discussion in 'Economics' started by rickf, Jul 10, 2008.

  1. rickf


    Just got this in the email this morning....desparation is in the air, methnks!


    An open letter to all airline customers


    Dear XXXXXXX

    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.

    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 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
    Delta Air Lines, Inc.

    Mark B. Dunkerley
    President and CEO
    Hawaiian Airlines, Inc.

    Dave Barger
    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.
  2. We need blood on the streets!
  3. please bail us out. our service sucks, we were too stupid to hedge our fuel costs, and we suck out extraordiary exec compensation, but since Congress is throwing money around, please have them throw some our way...
  4. eagle


    The US government has to wake up and thinking. Should the government listen to investment banks such as GS who declared that the soaring oil price wasn't due to speculation or listen to people in the field such as Airlines and consumers?
  5. wave


    We need change, a change of ways. We need cures, not treatments. We don't need new drilling off our coasts or in Alaska or any other part of the world for that matter. We need to change our ways period. Improved rail system, work closer to home, get on the bikes, etc. Drink a normal size beverage, not some supersize.
  6. Great post.

    Normally, I'd view a shout out from CEOs of one industry with skepticism, but in this case, they're right.

    And they're not the only industry convulsing from the record speculation - far from it. Automakers, restaurants, retailers of every kind, home builders, etc. and on and on....

    The games people have played with oil futures contracts are in large part responsible for an extreme exacerbation of our economic downturn.

    But the best remedy for high prices is high prices, and you're going to see that remedy kick sooner rather than later.

    The fact that oil can't rally off of alleged depletions, Iran, Israel, Nigeria, or a coming asteroid should tell you what the smart money that was long on oil is already doing.



    Oil did just what we expected it to yesterday as the "surprising" draw of 5M barrels surprised no one here, as it's the exact number we predicted 3 weeks ago when they closed NYMEX trading 20M barrels short for July (evidenced by the drop in imports already of 621,000 barrels a day below last month). It was actually worse than it seems for the oil bulls as the refiners got stuck with almost 3Mb of distillates they overproduced for the low-demand weekend. Don’t expect oil to come off the floor today and, as long as they stay under $137.50 for the week, we’re happy…

    Another strange thing you will notice looking at that oil inventory link - The US is EXPORTING 1.44Mb PER DAY of petroleum products. That means we are ordering 10Mb PER WEEK, which adds to our "consumption" refining it (I thought we had a shortage of refineries) and then sending 10Mb PER WEEK out of the country so it doesn’t show up in inventories. So it appears that we are using 10Mb more per week than we really are, as refiners flip the product over to other countries while oil bulls point to "evidence" of a shortage of product here in the states. Nice scam!

    Gasoline use is now at a 5-year low after spending a month over $4 and we are now down over 5% from last spring’s usage levels. "We think oil is set for a significant correction," says Michael Waldron, an energy research analyst at Lehman Brothers. "But it’s probably not going to occur until the end of this year or the beginning of next year."

    As evidenced by yesterday’s intra-day action, we need oil to go MUCH lower before the markets can get it in gear. So we will remain very well covered and very, very careful until we get some resolution to this latest round of bank hysteria and some meaningful relief at the pump.
  7. empee


    Well, we bail out IB and their MBS, which is pretty much the same excuses, as well as soon homeowners, why not airlines, GM/F, FNM/FRE, etc. etc.
  8. ssblack


    I got the same letter forwarded from a friend last night. Here's what I replied to him.


    OMG, I am personally calling all of these dilettantes tomorrow. Have they no clue regarding deficit spending and dollar depreciation? Of course they'll turn a blind eye to it, as they all are massively donating to the politicians behind the dollar debacle.


    Shall we start killing the speculators in ags, metals too? Why not just abolish futures markets altogether along with price stability?