Joemic33

An Open Letter to All Airlines - Quit Whining and Hedge Your Fuel Costs

Hey DanK,

Hindsight or foresight, It takes plenty of garbanzoes to hedge!!!!


On Jul 14 09:00 PM DanK wrote:

> Wow - what an onslaught of replies from all ends of the spectrum.
> First, I want to make it clear that my post was not as much an indictment
> on the airlines for not hedging their fuel costs (which in hindsight
> or foresight would be a wise business decision - oil prices have
> been volatile for years), but to chastise the industry for blaming
> "speculators"... for their ills and the recent run up in oil prices.
>
>
> Speculators are the "life blood" of any derivative market, providing
> liquidity, price discovery, and viability for hedgers. Sure, sometimes
> in markets speculators drive prices up, but other speculators come
> in, as I mentioned in the post, and sell to the buyers believing
> the fundamentals don't justify current prices. Remember, someone
> has been selling to the speculators all the way up - who will be
> crying for their heads when they make big profits when (if) oil prices
> decline?
>
> Again, the bogey man isn't functioning markets, with speculators
> and hedgers, it’s the underlying supply/demand fundamentals and myriad
> other economic dynamics that affect the price of oil (and all commodities).
> If I was to concede any restrictions to the marketplace, I would
> consider raising the margin requirements on contracts, to reduce
> some of the leverage involved, which we've seen to be the essence
> of the troubles in the housing market.
>
> I can't reply to all, but in general, I thank you for posting your
> replies and spurring discussion. Let's all hope for lower oil prices,
> and perhaps lower airline fares as well.

An Open Letter to All Airlines - Quit Whining and Hedge Your Fuel Costs

Very good, danny............ Hedge your fuel!!! Easy to say in HINDSIGHT!!!!!