Open Letter to All Airline Customers and SWA

[Quimby]

Very interesting since SWA has all but destroyed the rest of the airline industry since 911 with their fuel hedging program.

It’s been the key to their success. I wonder what their motive is??

AA767AV8TOR

Yup, always someone else to blame.

It's been a piece of the equation in running an airline.

In case you haven't noticed, about the only thing SWA & AA have in common is they're both airlines.

 

[Whataburger]

Very interesting since SWA has all but destroyed the rest of the airline industry since 911 with their fuel hedging program.

It’s been the key to their success. I wonder what their motive is??

AA767AV8TOR

It's like being mad a family because thay had a tornado shelter and you didnt. They survive and you are Dorthy and Toto.
Keep in mind, when you point your finger at someone, you have 3 fingers point back at you.
One ba ba ba ba Billion is a lot of money. I apologize for my company's foresight.

 

[jhill]

People are missing the point, speculators are an indispensable part of the market. They complete the symbiotic relationship between those who want to minimize risk (Hedgers) and those willing to take it (Speculators). Speculators are taking quite a gamble on the futures market, but for every winner, there is a loser. If you really want to screw up the market let the government get involved.

Southwest began hedging fuel for the same reason that a textile manufacturer buys cotton hedges, to protect themselves against future price volatility in the commodity on which they depend. It's a planning and safety tool. Without speculators willing to assume risk, you can't have hedgers trying to minimize their risk.

The speculators aren't causing the price of oil to go up. The uncertainty in the regions that supply oil, the weak US dollar, and basic supply and demand are causing the price of oil to go up.

They are not asking Congress to stop users of the product to stop speculating or hedging. They want the non user to get out of the oil speciulation market.

 

[Superpilot92]

Bskin,

That's more or less true in a well regulated open market. The key is transparency. The Hunt Bros tried to corner the silver market, when other speculators saw the huge position the Hunts held they realized the price was artificially high and they dumped their holdings. The Hunts were burned to the tune of $2Billion. Thats the traditional risk to cornering the market. What happens if non traditional players with massive amounts of money enter the market? Now add in a market where there is no transparency, i.e. you can not see who holds what or who's trading with whom. You get wash sales. What if these new players, all playing the same game (a herd mentality where no one company corners the market but as a group they have), own 70% of all existing futures contracts? As they trade amongst themselves (no risk in a wash sale) they are holding these contracts out of the market( artificial limiting of supply). The true speculator (who intends to take delivery) must enter the market and bid for what is available at that time. He must his business requires it. Thats trucking companies, airlines, refineries, etc. With these daily trends he can not sit back and hope that fear of a contracts expiration will cause a drop in price. Oil in normal trading is far to liquid for that. I'll show you that supply isn't the issue, I'll show you that the weak dollar doesn't cover current price either. What have been the effects of the Commodities Modernization Act? Why does the Intercontinental exchange exist? Who trades there and why don't those investment banks etc trade on the NYMEX? Please don't throw out cheap easy stuff like it's the fault of leftists, environmentalists, or the scapegoat of politicians. Stick to the point and explain the price.

THIS IS A GREAT POST ON THE SUBJECT

 

[Freeze_gopher]

People are missing the point, speculators are an indispensable part of the market. They complete the symbiotic relationship between those who want to minimize risk (Hedgers) and those willing to take it (Speculators). Speculators are taking quite a gamble on the futures market, but for every winner, there is a loser. If you really want to screw up the market let the government get involved.

Southwest began hedging fuel for the same reason that a textile manufacturer buys cotton hedges, to protect themselves against future price volatility in the commodity on which they depend. It's a planning and safety tool. Without speculators willing to assume risk, you can't have hedgers trying to minimize their risk.

The speculators aren't causing the price of oil to go up. The uncertainty in the regions that supply oil, the weak US dollar, and basic supply and demand are causing the price of oil to go up.

HCDAW,

We are not missing the point, Southwest's fuel hedges are a classic example of the effective and traditional role of speculation. They are mitigating price. This is a role that the markets were created for. That is just good business.
What you are missing is the role of massive financial institutions who are not mitigating price. Please take a look at the comments I made above that Superpilot was kind enough to quote. Answer those questions. That is the discussion, we are not actually even discussing speculation, that is the point that people are missing.

 

[bugchaser]

Southwest's fuel hedges are a classic example of the effective and traditional role of speculation

Sorry, wrong again!!!

How hard is it for some of you to get that what SW does is not and never will be speculation. What they do is to manage risk in the market. To not have any hedge positions and be a purely cash buyer would be the ultimate form of speculation.

What is needed is not a ban on speculation, but some limits put in place to stop the big hedge funds, pension plans, etc. from dumping huge amounts of dollars into the commodity markets as a kind of hedge against the weak dollar. If all speculation was stopped, there would be no ability for end users and producers to use the markets as intended to smooth out prices. This is not only a problem in energy markets. Other commodity users are suffering as well. The real problem that most politicians don't talk about is the weak dollar. With a strong dollar, there would be less incentive for investors to put money into the commodity markets.

 

[ASADFW7]

I am sorry that oil prices are not high because of SWA hedging. They are a small company. They only fly about 8 to 9 percent of domestic traffic.

 

[Freeze_gopher]

Sorry, wrong again!!!

How hard is it for some of you to get that what SW does is not and never will be speculation. What they do is to manage risk in the market. To not have any hedge positions and be a purely cash buyer would be the ultimate form of speculation.

What is needed is not a ban on speculation, but some limits put in place to stop the big hedge funds, pension plans, etc. from dumping huge amounts of dollars into the commodity markets as a kind of hedge against the weak dollar. If all speculation was stopped, there would be no ability for end users and producers to use the markets as intended to smooth out prices. This is not only a problem in energy markets. Other commodity users are suffering as well. The real problem that most politicians don't talk about is the weak dollar. With a strong dollar, there would be less incentive for investors to put money into the commodity markets.

Who do you think speculators are? Everybody that needs to buy large amounts of a raw material for end use are speculators. That is why these markets exist in the first place. All Airlines, large trucking concerns, refineries, or anyone else that uses that much of a commodity to make their business go are speculators. They are trying to mitigate price and quantify their costs in advance. The producer wants to know in advance that his product will be consumed at an acceptable price. The role that investment firms play is not the sole source of speculation.
Did you read my last two posts? No one is talking about ending speculation, it is a very valuable tool. Hence my comment that speculation isn't even what we are talking about.
We are talking about manipulation. You are quite correct that regulation is necessary, but even at that we still are not talking about traditional markets (NYMEX etc). We are talking about the Commodities Futures Modenization Act and the Emergence of the Intercontinetal Exchange.
The movement of money managers into commodities markets to hedge against inflation risk is a valid business strategy and is nothing new. But again that is not what we are discussing. The Intercontinental Exchange has no transparency, very few regulations (it has been nick named the wild west by Wall Street). Again Speculation is not the issue, manipulation is.
Sorry, I am not wrong. Please, go back read the posts that I made previously, and honestly try and answer the questions that I have posed. If you need info about supply and demand or the role of the dollar with regard to oil prices just ask, I'll be glad to point some things out.

 

[bugchaser]

Hey frozen gopher, until you understand what speculators are, we have nothing to talk about. End users and producers are not speculators. Nothing speculative at all about setting a hedge to lock in a price. You know what price you will pay no matter what happens to the underlying commodities cash price. Going long or short the commodity is speculating that the price will go up or down. Hedgers do not care if the cash price goes up or down. They are not speculators!! I spent a few years in the commodities industry and don't think I have forgotten it all. If you need some help comprehending any of this let me know.

 

[waveflyer]

well said-- freeze gopher-- youre getting caught up in rhetoric that 'sounds' true. The speculators are a big percentage of the problem. Regulation isn't there to do away w/ a free market-- but to make sure that the market exists w/o corruption. It's part of the balance. But maybe you all have grandmothers/grandfathers that didn't grow up in the depression or didn't share w/ you the causes of that.

Anyone else see this commercial? I saw the one post on him, but what do ya'll think?
http://www.youtube.com/watch?v=R2bOug1d20c


here's an article on it:

ENERGY: Oilman pitches wind power
T. Boone Pickens is putting big money behind his plan to cut crude oil imports.

By Andy Vuong
Denver Post
Published on: 07/12/08
Denver —- Legendary Texas oilman T. Boone Pickens compares America's reliance on foreign oil to a drug addiction and believes the cure will come in the form of wind farms and natural-gas-powered vehicles.
In Denver on Thursday to speak at an energy conference, Pickens detailed his plan to cut the country's oil imports by at least a third in 10 years.

He proposes a massive increase in electricity produced from wind farms, building enough to supply 20 percent of the nation's electricity and replace natural gas as a primary generating source. Natural gas would instead be used as a transportation fuel, cutting demand for gasoline.
The lofty plan faces several obstacles, including the lack of transmission lines for new wind power and the availability of natural gas vehicles and commercial stations to fuel them in the United States.
But Pickens, worth an estimated $3 billion, has pledged $58 million to promote the plan through 2008.
"The thing that has not happened in this country is we have not been pressed to do anything," said Pickens, 80, in an interview. "The reason we haven't is there's always been cheap oil."
With the price of oil hitting $147 a barrel Friday and possibly on target to hit $200 next year, he said the time has come to make a move.
Pickens is in the midst of a nationwide media blitz to promote his plan. The renowned corporate raider, who plans to build a 4,000-megawatt wind farm in Texas at a cost of up to $12 billion, said he didn't hatch the Pickens Plan for profit.
"I've got enough money," he said. "I don't need to make any more money, but I don't go into things to lose money."
He said the plan could cut the amount the country spends annually on foreign oil from $700 billion to $400 billion.
George Douglas, a spokesman for the National Renewable Energy Laboratory in Golden, Colo., said Pickens' plan is "not impossible" but has to overcome several challenges. "The big challenge is manufacturing," Douglas said. "We don't have the manufacturing capacity in the country to build that many wind turbines."
Douglas said the proposal also needs transmission lines to carry power from wind farms, generally built in desolate areas, into neighborhoods.
The Department of Energy released a report in May that said the nation could reach 20 percent wind energy by 2030. Pickens wants to reach that goal before 2020 by adding 200,000 megawatts of wind power. At the end of 2007, the U.S. had 16,818 megawatts of wind capacity, according to the American Wind Energy Association. One megawatt can power 300 homes.
Pickens spokesman Jay Rosser noted that even though there are only 140,000 natural gas vehicles in America, 8 million exist worldwide.