San Francisco (Thomson Financial) - Northwest Airlines Chief Executive Doug Steenland told a congressional panel Monday that oil speculation poses a serious challenge to the airline industry, and urged legislators to increase regulation of commodities trading and help rein in skyrocketing fuel costs. "The price of jet fuel, which as you know is tied to the price of oil, is out of control," Steenland said in prepared remarks released by the airline.
Steenland was testifying before the House Committee on Energy and Commerce, Subcommittee on Oversight and Investigations. "Supply and demand fundamentals alone do not explain the price increases and volatility experienced in the energy markets," he said, noting that worldwide daily demand for oil has increased 2% over the past 12 months, while prices have surged more than 100%.
Steenland, who also serves as chairman of the Air Transport Association, an industry trade group, blamed some of the increase on speculative investments in the futures markets by institutions such as pension funds, investment banks and hedge funds. He urged Congress to pass legislation to prohibit pension funds from investing in energy commodities; to close certain "loopholes" that allow unregulated trading by institutional investors; and give the Commodities Futures Trading Commission more power and funding to enforce rules and regulations.
Shares of Northwest fell 8.3% to $6.11. The Amex Airline index fell 5% to 17.16.