The energy commodity markets have become oddly bipolar. It seems most pundits are either projecting a collapse in oil prices to $80 per barrel or a super spike to $200 per barrel.

But for the balance of this year, fundamentals and simple logic support neither conclusion. As I’ve suggested for months, falling developed-world oil demand, a weakening US economy and the potential for a bounce in the dollar will put a lid on oil prices.

Similarly, emerging-market demand will offset demand destruction in the developed world. Meanwhile, supply growth–particularly in non-Organization of the Petroleum Exporting Countries (OPEC) countries–remains subdued. Global oil and refined products inventories remain relatively tight; there’s no global glut of crude. These factors will support prices higher than $100 per barrel.

That’s not to say we won’t see oil prices slip a bit further in the short run, perhaps falling to $110 to $115 per barrel. In fact, the trading action in the futures market appears to be pointing in that direction. I’m always suspicious of markets that fail to respond to bullish news.

Case in point: Geopolitical news out of Iran and Nigeria over the weekend was certainly bullish for crude, but oil failed to rally significantly on Monday. Intraday rallies in oil since the mid-July top have tended to fade before the close. This suggests a market in which some traders are still looking to take profits into strength.

The question is how to play a lackluster crude market. Broadly, most energy-related stocks have overreacted to the drop in crude oil; I suspect trading action in energy stocks will improve even if oil prices slip a bit further.

But there’s one sector that stands to benefit handsomely from a further slide in oil or, at least, a moderation in crude’s rally: the airlines. Some investors will rightfully cringe from any mention of this sector; after all, the airlines have consistently lost money throughout their post-deregulation history. Most of the majors have declared bankruptcy on multiple occasions since that time.

Airlines may make a terrible long-term investment but can be an outstanding short-term trade. In TES, we’ve traded the airlines on a few occasions; long-term subscribers will recall we took some triple-digit percentage gains in the airlines back in 2005.  

The airline industry is more dependent than almost any other group on energy costs. Consider that Delta Air Lines (NYSE: DAL) recently reported that its second quarter 2008 fuel costs were $1.7 billion compared to less than $800 million a year ago. Delta’s entire net income for all four quarters of 2007 was just $1.61 billion.

But the airlines’ leverage to oil prices is well known. Expectations are so low, in fact, that several major air carriers actually managed to beat consensus expectations in the second quarter.  

And although sentiment is already at rock-bottom, there’s a real basis for cautious optimism. First, if I’m right about oil, fuel costs won’t rise appreciably in the third quarter. This huge headwind is dissipating.

Meanwhile, the major carriers are finally taking real steps to address pathetic profitability. The most important step is capacity rationalization and restructuring. The air carriers are retiring older planes and permanently ending service for certain routes. The US airline industry has too many planes flying over too many routes; there just aren’t enough passengers to make this model profitable. Reducing capacity lowers operating costs and brings service in line with passenger volumes.

And anyone who’s flown recently knows the major air carriers are all instituting extra fees and charges, including checked baggage fees and a few extra dollars for that Bloody Mary on your flight home from Las Vegas.

Airlines are also replacing inefficient, decades-old airplanes with newer, more-fuel-efficient planes, such as the Boeing 787 Dreamliner.

Finally, there’s scope for further consolidation. US airlines will merge or be taken over, reducing the number of competitors and enhancing the surviving carriers’ pricing power.

My two favorite airlines for a trade are US Airways (NYSE: LCC) and Delta Air Lines. Delta reported a $1 billion loss in the second quarter, but that includes a $1.1 billion, noncash accounting charge known as goodwill impairment; if we net that out, Delta actually posted a small profit. Quite frankly, that’s amazing given the more than 100 percent jump in fuel costs the carrier has experienced over the past year.

Delta is aggressively cutting costs and reducing capacity. The company’s debt is 2.42 times its equity; for almost any business, that would be considered pathetic except for the airlines. For example, Continental Airlines trades at a debt-to-equity ratio of close to 3.4 and AMR Corp, parent of American Airlines, at more than 6. Delta has $1 billion in undrawn capacity on its credit lines and $3.3 billion in unrestricted cash; the company isn’t going bankrupt any time soon.

Delta is also in the process of merging with Northwest Airlines. In the company’s most recent conference call, Delta raised its projected savings resulting from this merger considerably. I’m adding Delta Air Lines to the Gushers Portfolio as a buy below 8. I see the potential for the stock to reach the mid-teens.

Please be advised that buying airlines is extremely risky, and I’m setting no stop on this trade right now because the sector is just too volatile. You should only take this trade if you’re willing to assume a far-higher-than-average risk and are ready to treat it as a trade, not an investment. Investors should consider using a smaller position to compensate for the risk.

For the even more adventurous, there’s US Airways. Like Delta, you could argue that US Airways was actually profitable–or close to it–in the second quarter if we exclude noncash charges. US Airways will also benefit from lower fuel costs and sharply falling capacity. Just recently, in fact, the air carrier sharply increased its capacity reduction plans.

I’m placing US Airways in the How They Rate Table as a buy recommendation. It’s a solid alternative to Delta for those willing to assume even more risk with a shot at even higher returns.