The Airline Loophole
The airline industry is proposing regulations aimed at reigning in the bad commodity speculators while leaving the “legitimate” speculators, such as themselves, untouched.
According to the industry’s website, StopOilSpeculationNow.com, the airlines want to limit the size of trades conducted by “any trader not hedging with the intention of taking physical delivery of a related commodity.” In the word of ATA spokesperson David Castelveter, “our campaign is about stopping the speculation, the buyers of paper contracts — people who are not buying a drop of oil.”
The problem with this argument is that the airlines themselves are currently engaged in the buying and selling of “paper contracts” for jet fuel through their extensive fuel hedging programs. The industry argues that because the profits reaped from fuel hedging are eventually used to purchase jet fuel, they are not truly speculative and should not be restricted. According to Houston Chronicle columnist Loren Steffy, the airlines want us to believe that their “motives are somehow more pure than, say, a pension fund that uses trading profits to boost the retirement accounts of its members.”
Current legislation moving through CSongress and supported by the airline industry creates a huge loophole by defining “legitimate” speculation in such a way that allows the airlines to continue to reap the benefits of fuel hedging yet restricts the ability of other commodity traders to speculate on the price of oil. Such legislation would target the supposed bad speculators, such as pension funds and other institutional investors, and leaves the good speculators, such as the airlines, unencumbered by increased restrictions on commodity trading.
2 Comments, Comment or Ping
Kevin
It isn’t surprising that the airlines would want to exempt themselves, but what is disappointing is that Congress seems willing to leap into action for an industry that is showing such disrespect to the public.
Aug 22nd, 2008
Ellen
Anyone who has flown lately will know that flying is not what it used to be. We’re not only letting the airlines off the hook with their failure to run a successful business, we’re also allowing them to shape our national debate on energy policy. It’s outrageous.
Aug 25th, 2008
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