I keep hearing about oil bubbles and fuel speculation, but I never saw much detail behind it. Doug Streenland, Northwest Airlines' CEO, provided a bit of clarity on the topic while testifying before Congress:
'The price of jet fuel, which as you know is tied to the price of oil, is out of control. Supply and demand fundamentals alone do not explain the price increases and volatility experienced in the energy markets,' he said, noting that worldwide daily demand for oil has increased 2% over the past 12 months, while prices have surged more than 100%Assuming supply, how does a 2% increase in demand translate into a 100% increase in price? He's right, there is something rotten in the state of Denmark (and no, it's not just my dirty luggage).
Streenland then went on to blame the increase on speculative investment in the futures market by investment banks, hedge funds and other large characters. He asked Congress to limit these investments by pension funds and increase regulation on this kind of institutional trading.
I wonder when this bubble will burst - and in what shape the US airlines will be when it does...
Northwest CEO blames speculators for rising fuel costs [Forbes]
Northwest Airlines [Official Site]
0 comments:
Post a Comment