Wednesday, July 9, 2008

High Gas Prices

OK, I'm not complaining here, but the gas prices are really hitting our family hard these days! As a middle-class two-income working family, our budget is so tight these days. Seems like there's nothing left at the end of the paycheck!

I received an interesting open letter today from Delta Air Lines, of all places. I didn't have the best of experiences when I went to Boston at the end of March. Many of you, if you are a frequent flyer or in a miles program, may have received the same letter. Since it is an open letter, I'll post the contents here:

Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.

For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers.

Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.

Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.

Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.

Now, I'm normally not the type of person that buys into alot of hype from the airline industry. I mean, they are charging us for peanuts, service isn't what it used to be, plenty of flights are delayed or cancelled for seemingly no reason. However, I believe that the health of the airline industry is somewhat of a gauge for the health of our nation's economy. I've heard before about the speculation on the commodities markets, but, not being an economist, well, it's just so hard to understand!

Right now, it's my understanding that the price of oil is really NOT $150 a barrel in actuality, but it's all on paper. The traders and speculators are making it go up. David explained to me that Bush signed a bill de-regulating the commodities markets way back when. I can't really comprehend all the politics behind it, but the de-regulation is basically letting the traders do whatever they want.

Here's the thing: What can we do about it? Right now, I'm not in a position to do much. I can't afford to go right now and buy a new vehicle that will get better gas mileage. I'm buying less, making less trips trying to conserve fuel. I work 14 miles from my home, so it's 28 miles round trip. I can't move closer to work right now, I can't afford to!

One thing we can do is to contact our federal legislators to let them know how we feel about the gas prices and commodities trading. This paragraph was at the end of the letter:

The nation needs to pull together to reform the oil markets and solve this growing problem.
We need your help. Get more information and contact Congress by visiting

Don't stop reading. I got an email from a friend recently telling me about the Gas Price Protest. You can read on Snopes and other websites that internet-based petitions simply don't work. However, letters to our congressmen and senators do! Especially in an election year. If you visit the Stop Oil Speculation Now website, you can generate emails or printed letters to your representatives urging congressional action. Gas prices, in my opinion, will only continue to rise if Congress does not step in and do something soon!

And, finally, if you want to read an interesting blog about traffic, transportation, and gas prices, visit this web site.


Shadow said...

I don't know where you live, but in the bay area I'm paying 4.51 a gallon. That hurts.

Doreen said...

Uh, yes, Hon, you'll probably get a "feisty" one!!!!! All the Jiangxi babies I've met have that "special" flair!!!!!
Hey, how about you do Sichuan next?

Doreen in Montreal Mom to Faith-Jiangxi(FengCheng maybe that'll make a difference?) & Mia Sichuan

Adamgv said...

Those who raise gas prices are already killing our children. Take back our country! Acquire the Red Alert Newsletter.