Post by DevilsPGD Post by nobody Post by Earl Grieda
That's interesting. I would expect business expenses to be a competitive
secret. I wonder what sort of prices the other airlines negotiated.
Airlines with bad credit cannot buy hedges. The better your credit, the
longer ahead you can buy hedges. Your ability to pay for the fuel you
contracted for 2 years down the road is very important.
While I don't disagree, I also suspect the oil companies wouldn't have
any trouble selling that same fuel on the open market at that price
Too Bad for U.S.
The good news: Richard Branson, the mogul behind Virgin Airlines, who
recently started a private venture into space tourism, wants to build an oil
Like the rest of the airline industry, Mr Branson's Virgin Atlantic
Airways has been stung by higher jet fuel prices and was forced to raise
fuel surcharges for the second time in four months.
Hurricane Katrina sent oil prices soaring to $US70 a barrel because it
shut several US Gulf Coast refineries, which turn crude oil into products
like diesel, gasoline and jet fuel.
"If we don't start now to get more refineries built then fuel prices could
literally rocket to $US100-$US200 (per barrel of oil) and the world economy
would come to a grinding halt," Branson said in an interview on financial
news network CNBC overnight.
The bad news: It likely won't be in the good ol' U.S. of A. Remember the
words of James K. Glassman on why our gasoline prices are so high?
The oil is there. The obstacles to putting it to use are strictly
political: restrictions on drilling, on building refineries [bold added]
(the number has dropped by more than half since 1980), and on making the
distribution system more efficient. Remove the barriers, and prices will
For anyone who might doubt that, Branson wants to build a refinery and could
easily afford to, but oil analysts think he will avoid trying to build in
"My immediate reaction to that is: Not in the US," said Paul Flemming, oil
analyst at Energy Security Analysis Inc. "That's definitely more pie in the
sky than anything."
In the US, getting a permit could involve years of navigating local,
state, and federal regulations and protests from environmental and community
groups, analysts say.
With all this talk about "cutting red tape" to get aid to victims of
Katrina, why has it not occurred to anyone that one need not cut red tape if
one gets rid of it altogether? And why speak of getting the government out
of the way only during emergencies?
Had the United States more oil refineries (and required the manufacture of
fewer special blends), gasoline prices would have been lower before Katrina
to begin with and would have increased by less after the storm hit
refinery-rich Louisiana -- assuming that refineries were more evenly spread
out geographically than they are. The government admitted part of its role
when it waived certain clean air standards after Katrina to "stabilize gas
Too bad this is just a short-term, range-of-the-moment fix. These
regulations should be abolished altogether, as should those that have
prevented new refineries from being built for decades. But having regulated
itself into crisis management mode, the government will reinstate the
restrictive regulations as soon as it feels people will tolerate the
additional pressure on gas prices again. Note that this waiver is, in
essence, additional government regulation! This is a classic example of the
economic principle that controls breed controls.
The premise that everything is up to the government is why, when gasoline
prices stay up, our government will be more likely to flirt with price
controls rather than getting out of the way -- permanently -- of new
Only when our electorate gives up its paranoia about companies
"price-gouging" at the pump (due to a shortage created in the first place by
its elected representatives) in favor of a willingness to permit men like
Branson to make real money, we will get better government and lower gasoline
Our nation's response to rising gasoline prices so far gives "penny wise,
pound foolish" new meaning.
Here's hoping Branson is successful in finding a way to save on jet fuel,
and make additional money. Too bad for us it won't be here.