The world is huge

Don't miss any of it

Travel news, itineraries, and inspiration delivered straight to your inbox.

By proceeding, you agree to our Privacy Policy and Terms of Use.


Are oil speculators to blame for our airline woes?

Desperation in the airline industry over oil prices has caused a seemingly unprecedented collaboration among the major U.S. airlines, at least temporarily. Over the past several days the airlines have emailed their flyers an An Open Letter to All Airline Customers, calling on travelers to contact their Congressional representatives and ask them to support legislation stopping oil speculation, something the airlines blame in part for causing sky-high fuel prices. The letter was signed by the CEOs of AirTran, Alaska, American, Continental, Delta, Hawaiian, JetBlue, Midwest, Northwest, Southwest, United, and US Airways.

The letter explains that today at least two thirds of oil futures contracts are purchased by speculators, compared to one fifth 20 years ago: “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.”

The note then goes on to explain the need for Congress to create reforms that will help keep speculation in check. It links to the website, where you can look up your senators and representatives and send them an editable form letter.

So, are the airlines right, are oil speculators the real villains behind our travel woes? Air industry blogger Rick Seaney recently asked representatives from the Department of Transportation (DOT) this question, and the DOT seemed to agree with the airlines that speculators are a big part of the problem. Seaney, however, noted arguments made in a recent Economist article, Don’t Blame the Speculators. The article suggests that the percentage of oil futures being bought worldwide by speculators is much smaller than the airlines’ estimates. It also notes that the goal of oil speculation is to win bets on how much oil prices will go up or down based on supply and demand, not to force prices higher.

The hundreds of well-thought-out comments debating the article’s ideas suggest that the issue is much more complicated and multifaceted than either the airlines or oil speculators would have us believe. What do you think?

We hand-pick everything we recommend and select items through testing and reviews. Some products are sent to us free of charge with no incentive to offer a favorable review. We offer our unbiased opinions and do not accept compensation to review products. All items are in stock and prices are accurate at the time of publication. If you buy something through our links, we may earn a commission.

Top Fares From