Originally Posted by
wetrat0
I'll take a stab at this. Everything you have said is correct, but there is another question at hand: whether the "X amount of fuel" is even produced at all. In other words, with refineries closing down recently, capacity (and consequently supply) has decreased, leading to an increase in prices. By buying and operating the refinery they are increasing refining capacity and increasing supply of jet fuel, which will drive down prices. Thus, we have something more like the following:
Scenario 1: Refinery is closed, supply is restricted and X amount of fuel sells for $1100 on the open market.
Option A-- buy fuel for $1100.
Scenario 2: Refinery is operating, supply is expanded and X amount of fuel sells for $1000 on the open market.
Option A-- use own fuel.
Option B-- sell fuel to AA for $1000.
In Scenario 2, either option costs $1000. But in Scenario 1, there is only one option, and it costs 10% more!
...
Scenerio 3) JP Morgan wants cover to assist in gamimg the futures market, and is tossing DL $200M or so a year to make their play look legit in a market that might soon have political repercussions against pure speculators. DL actually has little control over anything, and the discount fuel just arrives in NY.