Saturday, October 25, 2014
Inquirer Daily News

Speculators help to drive up oil prices

Back in the summer of 2008, speculation by commodities traders drove up oil prices, peaking one day at more than $140 a barrel before falling back. Airlines, staring ruin in the face, took advantage of the situation to first add fuel surcharges to fares and then to "unbundle" their fares, beginning the era of a la carte pricing in which fees are charged for things previously included in the ticket price. Airlines also have reduced capacity substantially since then as a way to stay profitable.

Speculators help to drive up oil prices

Back in the summer of 2008, speculation by commodities traders drove up oil prices, peaking one day at more than $140 a barrel before falling back. Airlines, staring ruin in the face, took advantage of the situation to first add fuel surcharges to fares and then to "unbundle" their fares, beginning the era of a la carte pricing in which fees are charged for things previously included in the ticket price. Airlines also have reduced capacity substantially since then as a way to stay profitable.

We now seeing history repeat itself in rising oil prices, so don't be surprised when airlines say they must raise fares and fees to cover their costs. Already this year, the major carriers have pushed through two base-fare increases and are working on a third.  Here's a smart story on the current oil-price situation and why it doesn't have much to do with drilling for more ... 

Tom Belden
About this blog
Tom Belden has been reporting about Philadelphia International Airport and other air travel subjects for more than 20 years, writing columns for The Inquirer's Travel and Business sections. His reporting (with colleague Craig McCoy) on baggage handling problems in Philadelphia have been credited with helping to improve the system. His previous blog was called Road Warrior. He can reached at tbelden@phillynews.com. Reach Tom at tbelden@phillynews.com.

Tom Belden
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