Oil and Hedge Funds

A couple of weeks ago there was a piece on cable news about the airline business, looking at the hobbling majority, the mostly bankrupt majors and sunny little Southwest whose market cap now exceeds United or some such sharemarket BS.

The crux of the matter was that, while everyone else, except maybe Ryan Air, is paying the going rate for fuel, Southwest is hedged to hell and back, is still burning JP7 at $26 a barrel and leaving the rest in its contrails. And who could blame them for literally burning their opposition out of the sky so that when they finally have to bite the bullet of actual fuel costs, the number of competitors is significantly reduced.

While listening to the story a little thought popped into my head and said, “Good business, really stupid economics”.

A Networked World