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...To get back into the politics of this, I really, really wish we'd go back to only allowing people to buy oil futures if they were the ones who were actually going to be taking possession of that oil. So if you go and buy x number of barrel futures, that you will indeed take those barrels of oil. ...!
If somebody buys futures, somebody else must sell them.
If you had booked to fly away on vacation this year and when you got to the gate, the Airline agent said: "Jet A1 is costing us more today than it did when you booked your ticket, you'll have to stump up an additional $200 if you want to get on this flight" you'd be happy with that?
Airlines buy futures to allow them to know in advance what the fuel is going to cost. If you want everybody to pay whatever the going price is for fuel on the day, expect a few surprises when you want to travel - or when you want to buy something which had to be transported to you.
If somebody buys futures, somebody else must sell them.
If you had booked to fly away on vacation this year and when you got to the gate, the Airline agent said: "Jet A1 is costing us more today than it did when you booked your ticket, you'll have to stump up an additional $200 if you want to get on this flight" you'd be happy with that?
Airlines buy futures to allow them to know in advance what the fuel is going to cost. If you want everybody to pay whatever the going price is for fuel on the day, expect a few surprises when you want to travel - or when you want to buy something which had to be transported to you.
But I'm not talking about buying and selling as a middle man- your example is exactly what I mean, for airlines to buy their fuel now, but it is the futures for the fuel they will actually take delivery if in the next few months.
This is how it used to work, I believe it was in the year 2000 or 2001 when it changed that people could buy and sell paper oil without ever actually taking delivery of said oil.
If somebody buys futures, somebody else must sell them.
If you had booked to fly away on vacation this year and when you got to the gate, the Airline agent said: "Jet A1 is costing us more today than it did when you booked your ticket, you'll have to stump up an additional $200 if you want to get on this flight" you'd be happy with that?
Airlines buy futures to allow them to know in advance what the fuel is going to cost. If you want everybody to pay whatever the going price is for fuel on the day, expect a few surprises when you want to travel - or when you want to buy something which had to be transported to you.
The rising cost of tickets is certainly related to increased oil prices but consider this:
Quote:
Since April 2011, fuel surcharges by U.S. airlines have risen 53%, while fuel prices have increased 24%, according to a study by Carson Wagonlit Travel.
“Airlines are quick to raise fuel surcharges when fuel costs increase, but slow to reduce the surcharges when fuel prices go down,” Mr. Harteveldt said. “It is a way for an airline to indirectly raise its fares without signaling to its competitors that it’s trying to raise fares. The base fare is almost a form of pricing camouflage.”
What’s even worse about these fees is that U.S. travelers pay so much more in fuel surcharges to fly to Europe than the Europeans pay to come to the United States. The Europeans are paying about $180 less in fuel surcharges to come to the U.S. than Americans pay on flights from the U.S. to Europe. The difference from England is less, but we still pay $82 more.
And international airlines frequently impose fuel surcharges on trips taken with frequent flyer miles:
Quote:
If you read recent reports about a a $500 fuel surcharge tacked on to an frequent flyer award flight on British Airways, did you wonder whether this was the only instance? A reader did: "A huge surcharge for a "free" trip on British Airways – is this just an isolated scam or the beginning of another round of frequent flyer devaluations?"
The short answer is, "So far, with U.S. airlines, it's isolated, but it's the norm for many other lines."
So how do we get back to a truly "free" market situation where all fees for all times and all circumstances are posted by airlines? They have figured out how to game us.
Communism is an economic system where man exploits man. With capitalism, it's the other way around.
But I'm not talking about buying and selling as a middle man- your example is exactly what I mean, for airlines to buy their fuel now, but it is the futures for the fuel they will actually take delivery if in the next few months.
This is how it used to work, I believe it was in the year 2000 or 2001 when it changed that people could buy and sell paper oil without ever actually taking delivery of said oil.
I think you'll find it changed a little before that.
Do you think all those people who bought pork bellies on the Chicago mercantile exchange got home to find a ton and a half of pork on the doorstep?
As I said in my last post, if somebody is buying oil futures (and I'm well aware that futures traders do make money doing so - they wouldn't bother if there was no money to be made) then somebody else must be selling them.
If you want to get rid of futures traders, who are the airlines going to buy the oil futures from?
I think you'll find it changed a little before that.
Do you think all those people who bought pork bellies on the Chicago mercantile exchange got home to find a ton and a half of pork on the doorstep?
As I said in my last post, if somebody is buying oil futures (and I'm well aware that futures traders do make money doing so - they wouldn't bother if there was no money to be made) then somebody else must be selling them.
If you want to get rid of futures traders, who are the airlines going to buy the oil futures from?
Ok, I was a little off on my understanding of how it worked back before the year 2000, but basically there were limitations in place so that those who were not going to be the primary recipients of the oil had trouble getting in on the game. Here is a brief piece from bakerinstitute.org explaining the changes made in the Commodity Futures Modernization act in the year 2000 that started the oil futures mess we have seen ever since that have caused instability in the pricing (the full document is at http://www.bakerinstitute.org/public...ket-082609.pdf )
The Commodity Futures Modernization Act (CFMA) of 2000 effectively cleared the way for
more lax regulation of new oil risk management products, including index funds and price
swaps, setting the stage for a rapid increase in financial players’ participation in over-the-counter
(OTC) markets. The CFMA was approved by Congress on December 15, 2000, and signed into
law by President Clinton six days later. It is particularly important because it designated certain
OTC derivatives transactions (including those involving oil) to be outside of the jurisdiction of
the CFTC. Thus, the CFMA made it easier for financial players to obviate speculative limits by
creating a “loophole” that exempted certain participants from speculative position limits and
other regulations due to their involvement in OTC markets or electronic trading platforms—such
as ICE or the now- extinct Enron Online.5 These exchanges are managed chiefly by financial
institutions and companies who provide “risk management services” but are not primarily oil
producers or consumers in the physical oil market.
Didn't you all hear that a butterfly in Venezuela burped which made a guys trigger finger on his AK47 twitch in Iraq which made our own oil importers go HMMMMMM and there you go $5 bucks a gallon just when maybe the economy is showing signs of improvement.
Actually there is less gas being produced since some refineries are switching over to the Summer blend but it seems like in the past when they did the prices didn't spike? like they do today?? Can we thank Obama?? or that gasy butterfly??
So Mr Varney said this morning on Fox that" every cent the cost of gas goes upward cost the consumers one billion dollars." Oh my gosh, here we go again. This time we are getting darn near close to four dollars a gallon in SC and its nearing five dollars in California.
The Keystone pipeline is not ready as yet. So what is the problem this time around? Its not summer travel time yet.
What can they blame it on now?
Are we even paying attention this time around?
Are we getting so passive that we just let the prices ride higher and higher with no complaints?
This can't be good for home fuels either. Heating ones home is going to take a small fortune.
Just wondering how many are giving this a thought? Do we just assume that it will go up and down on a whim?
I am seriously thinking by summer travel time we will be paying five dollars a gallon. I thought that would not happen in the near future and I was certainly wrong.
Most of the world it is already 5 bucks a gallon. In most of Europe it is close to 8 bucks. It's usually supply and demand. Crude is approaching 100 bucks so prices will go up accordingly. There are options if you want to save money. In major cities bike riding is gaining popularity. It is good for you to boot. Make sure you tires are inflated properly. Oil is changed regularly. Try to plan things in one trip instead of multiple ones. There is quite a bit of things you can do. You want to pay 20% less in gas then reduce your consumption 20%. If everyone consumed 20% less gas then prices would drop too.
The rising cost of tickets is certainly related to increased oil prices but consider this...
So how do we get back to a truly "free" market situation where all fees for all times and all circumstances are posted by airlines? They have figured out how to game us...
'All fees for all times and circumstances? - Not possible.
Airlines try to sell as many seats as possible at the highest prices. They've got a pretty good idea 'what will sell at what price' and they do know the 'break-even load factor' for the flight.
Once they're in profit on a flight then any additional seats means clear (nearly clear) profit. They may (and some still do) sell off seats they can't get rid of to (what used to be called) 'bucket shops' who will try to sell them on. Some years ago, you could have 5 people sitting in a row across an aircraft each of whom had paid a different price to the others. Some of the price variations were startling.
If somebody - a 'bucket shop' or a ticket consolidator (which, AFAIR; is like a bucket shop but charges a bit more ) wants to sell off a few tickets at a really low price, there's nothing to stop them. (That used to happen, too.)
Everything seems to have changed and the price for a ticket often bears little relationship to what you'll pay. There's the ticket price, the fuel surcharge (maybe - not all airlines charge that) the 'security' charges (which are often outrageously high) and 'taxes' which seem to be a figure plucked from thin air.
Prices may vary depending in which direction you book the flight. Transatlantic prices used to be significantly cheaper if the flight originated from certain European airports. If you wanted to fly from London to the US (and you could get away with it) it was often cheaper to book a seat on flight which originated in Schipol and flew via London. Tear up the Schipol-London coupon and board the Flight at London. - That was cheaper than flying from London. (Until the airlines found out what people were doing, ...
If you fly from the UK you will (AFAIK) be charged a hefty 'departure tax' (Well, it's not called 'Treasure Island' for nothing.) If you are taking animals with you and you fly into or out of the UK, expect to be ripped off royally.
Fuel surcharges may vary - but then again, the price of fuel varies from place to place. If you fly within the UK, there is VAT on the fuel (but if the aircraft lands at a destination outside the UK, there is no VAT on the fuel.
There is no VAT on airline tickets. Not yet, anyway.
There no longer seem to be as many 'good deals' on long-haul flights as there used to be - but none of the airlines seems to be making much in the way of profit, either.
Most of the world it is already 5 bucks a gallon. In most of Europe it is close to 8 bucks. It's usually supply and demand. Crude is approaching 100 bucks so prices will go up accordingly. There are options if you want to save money. In major cities bike riding is gaining popularity. It is good for you to boot. Make sure you tires are inflated properly. Oil is changed regularly. Try to plan things in one trip instead of multiple ones. There is quite a bit of things you can do. You want to pay 20% less in gas then reduce your consumption 20%. If everyone consumed 20% less gas then prices would drop too.
It is indeed about $8 in Europe, but US Forces in Germany pay (effective 15 Feb) :
Super E10 $3.81 (the price has just risen by) $0.073
Super $3.96 (the price has just risen by) $0.073
Super+ $4.11 (the price has just risen by) $0.069
Diesel $4.30 (the price has just risen by) $0.082
Though the real tax-free price would probably be rather lower.
...The Commodity Futures Modernization Act (CFMA) of 2000 effectively cleared the way for more lax regulation of new oil risk management products, including index funds and price
swaps, setting the stage for a rapid increase in financial players’ participation in over-the-counter
(OTC) markets.
The CFMA was approved by Congress on December 15, 2000, and signed into law by President Clinton six days later. It is particularly important because it designated certain OTC derivatives transactions (including those involving oil) to be outside of the jurisdiction of the CFTC. Thus, the CFMA made it easier for financial players to obviate speculative limits by creating a “loophole” that exempted certain participants from speculative position limits and other regulations due to their involvement in OTC markets or electronic trading platforms—such as ICE or the now- extinct Enron Online.5 These exchanges are managed chiefly by financial
institutions and companies who provide “risk management services” but are not primarily oil
producers or consumers in the physical oil market.
I share your reservations about the lax management - but IMO, its the laxity of the management which is the problem, not the fact that the futures markets exist (or that people make money out of futures. - Most people I know would not work in a job if they didn't get paid for the work they did.)
The government - whoever is in the government - should, IMO. be responsible for controlling securities and investment trading. They're paid to run the country and they should be held liable if they fail to do their job.
The SEC has been perennially under-funded and over-worked.
(When I first came to live in the US, I decided to become a 'Registered Representative' (A 'Stockbroker' where I came from.)
Where I came from being a stockbroker was reckoned to be a fairly respectable occupation. I soon found that in the US in all too many cases 'Registered Representative' was a euphemism for 'A crook who hasn't been caught, convicted and jailed.'
For at least the last 25 years, successive governments in the US have ignored the outrageous behaviour of a number of people they are supposed to control.
That doesn't stop anybody from being re-elected, however.
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Airlines already have fuel surcharges
) wants to sell off a few tickets at a really low price, there's nothing to stop them. (That used to happen, too.)