Northwest CEO Wants Oil Speculation Addressed

As Congress moves to consider limits on the presence of speculators in the oil market, it will have the strong backing of the airline industry.

At a hearing Monday of the House subcommittee on oversight and investigations, the chairman, Rep. Bart Stupak, D-Mich., said assets committed to commodity trading indexes totaled $260 billion in March, up from $13 billion at the end of 2003. He said speculators account for 70% of the trading in West Texas Intermediate crude on the New York Mercantile exchange, up from 37% in 2000.

Stupak backed three measures -- raising the margin requirements for oil price speculators to 50%, establishing volume limits to ensure that most oil futures buyers are consumers, such as airlines and refiners, and requiring full disclosure of trading.

A witness at the hearing was Doug Steenland, CEO of NorthwestNWA and president of the Air Transport Association.

"The highest priority is to look to tackle the overall price of fuel, given the fact that it's now 40% of our total cost pie," Steenland said. "Clearly, addressing the financial speculation is the most immediate thing the Congress can do."

The ATA says the industry's 2008 oil bill is expected to increase by $20 billion to $61 billion, resulting in an expected loss of around $10 billion. Already, eight carriers have shut down, and about 14,000 airline industry jobs have been lost.

The industry "is going to have to be in a bit of a race," Steenland, whose airline is merging with DeltaDAL, said. "We're looking to pass through those costs as quickly as we can. As those costs get passed through demand shrinks, and so we need to take capacity out."