WASHINGTON, DC – The Air Transport Association of America (ATA)is urging the Commodity Futures Trading Commission (CFTC) to further reduce speculative position limits for energy. Excessive speculation drives the cost of fuel and leads to unwarranted price spikes, which could adversely affect the country’s economic recovery.
ATA believes that limits in the Notice of Proposed Rulemaking (NPRM) are too high and do not meet the clearly-stated requirements in the Dodd-Frank Wall Street Reform Act to address excessive speculation, which drives fuel costs and, as the single largest expense for airlines, detrimentally impacts profitability, employment, and our customers.
“Excessive speculation, unrelated to the fundamentals of supply and demand, creates volatility in prices that simply cannot be effectively managed by the airlines or, for that matter, any other industry where fuel is a key cost item, and it damages the economy,” said ATA Vice President and General Counsel David Berg. “The extraordinary price fluctuations that harmed consumers, industry, and the economy in recent years will not be prevented by the proposed limits, and with predictions that prices will once again exceed US$100 a barrel, the CFTC must do more to address this problem by delivering on the intent of Congress as clearly outlined by Dodd-Frank. The market easily can function efficiently and effectively with more stringent limits.”
Bona fide hedgers, such as airlines and truckers, used to represent 60 percent of the oil futures market; today, speculative interests control 60 percent of the market. Restoring historical levels of speculative interest in the oil futures market will do much to prevent unfounded volatility in energy prices, maintaining adequate liquidity for bona fide hedgers and ensuring that efficient market function and price discovery are not compromised.
The Air Transport Association of America is the industry trade organization representing the leading US airlines.