[palmer]

Well one thing you have wrong is that producers don't hedge long, they hedge with puts or foward-sell in case the price drops. If the price goes up they are out on the contract, but their commodity in the ground is worth more. If the price drops they are good on the contract. If a commodity producer wants to forward-sell, but they aren't enough SW Airs to buy the fuel, who are are they going to sell to?

Conversely if there is an anticipated shortage (e.g. from Mideast unrest) and the airline wants to buy fuel futures and producers won't sell theirs at that time, who are they going to buy from? The "speculators" are the answer in both cases, they are simply middlemen, they can make wrong or right bets (and a lot of them are long and wrong right now).

[NVDave]

Yes, you’re right — sorry, I flipped that out after a 1,000 mile drive and two hours of sleep.

[NVDave]

Re-reading what I was trying to say:

Producers are “naturally long” - ie, they want the price of what they produce to go up.

Consumers are “naturally short” - ie, they’d really like the prices to go down.

Their hedge positions would be against the opposite of their fondest desires happening.