Jet fuel, the dollar, and your pension fund

Northwest Airlines CEO Doug Steenland also happens to be this year's chairman of the Air Transport Association. That's why Steenland was on Capitol Hill for some Monday morning quarterbacking about public policy on institutional investments. Steenland's point, before the House energy investigations subcommittee, was that global oil demand has risen only 2% in the past year but prices have risen about 100%, therefore what's driving prices up is mostly not demand. He cited two others factors -- the weak dollar, which means a U.S. airline pays $55 more per barrel for fuel than does an airline that is buying its kerosene in euros- and institutional investors like pension funds, which are investing in fuel futures contracts because they yield a better return than most stocks. At the moment, to put it another way, speculation is doing more to drive up the airlines' costs than actual demand for oil. U.S. airlines consume more than 20 billion gallons of jet fuel a year. The run-up in fuel prices costs hundreds of billions of dollars and airlines are harder hit than any other industry. The International Air Transport Association said on its Web site Monday that global jet fuel prices were now more than 90% higher than a year on average. Steenland wants Congress to close what he calls a loophole that lets institutional investors engage in speculations that is forbidden to others.