Posted on 06/09/2008 1:23:15 PM PDT by PeaceBeWithYou
The dramatic surge in oil prices—including a $16-per-barrel jump in just two days last week—has left Washington regulators scrambling to exert new oversight on futures trading in oil and other commodities. The U.S. regulatory agency's abrupt shift toward more rigorous oversight in the past two weeks also represents a stark example of how the pinch from high gasoline prices has changed the political landscape and made energy traders prime suspects in congressional inquiries.As recently as May 20, the U.S. commodities regulator, the Commodity Futures Trading Commission (CFTC), insisted at a Senate hearing that speculation was not causing the rapid spike in energy prices. The CFTC's chief economist, Jeffrey Harris, testified that the agency found that speculation and manipulation are not causing energy prices to surge. He said that instead prices are being driven "by powerful economic fundamental forces and the laws of supply and demand." Nine days later, after further pressure from Congress, the agency announced steps aimed at more oversight of energy futures trading.
Among the measures:
• A new information-sharing agreement with Britain's commodities regulator, the Financial Services Authority (FSA), to gather information on large positions of the benchmark West Texas Intermediate (WTI) contract.• A proposal to consider reclassifying investment banks such as Goldman Sachs (GS) and Morgan Stanley (MS) as speculators, which would subject them to trading limits from which they're currently exempt.
• An investigation of the crude oil trading market dating to December, 2007.
(Excerpt) Read more at businessweek.com ...
Lots more of interest in this article for the interested Freeper.
Congress is going to hold hearings...grandstand on television...and then...do nothing.
How silly.
As if we are the only market. All regulation will do will move it to London or the Caymans or somesuch.
But not in this case. When constituents are screaming to control oil prices, there will be action.
This is long over due. They need to regulate the Intercontinental Exchange.
This two part article is MUST read for everyone who drives or heats their home.
http://www.star-telegram.com/ed_wallace/story/651928.html
http://www.star-telegram.com/ed_wallace/story/659081.html
I recall a similar wild spike in electricity prices in California, several years back, 2005? Also, in natural gas, in 2006 I believe.
Sounds like this CFMA needs to be ditched, with a return to regulations created during the Great Depression.
As for congress, we "threw the buns out" in 2006 for what? Congress has done NOTHING but campaign for their horse in the presidential race. ENOUGH of the hearings, there are TOO MANY hearings! Open those Alaskan oil fields!
$16 is more than a barrel of oil was getting in the mid 1980’s!
NYMEX shows Brent up $0.17 to $134.08 and CL (WTI) closing up $0.31 at 134.66
I’ve said this for years now.. this bubble will burst the minute the regulators get serious about it... However with the amount of greed tax on it right now, until some people get frog marched, I don’t see it returning to where it should anytime soon.
“They need to regulate the Intercontinental Exchange.”
You sure you are on the right website?
This is a free market, conservative, website for people who undestand basic economics.
MORE regulations are NEVER the answer.
All increased US regulations would do will move the trade to China, Hong Kong, London -— somewhere where we’d have LESS oversight and be subject to MORE manipulation by foreign powers.
• A proposal to consider reclassifying investment banks such as Goldman Sachs (GS) and Morgan Stanley (MS) as speculators, which would subject them to trading limits from which they’re currently exempt.
It’s about time. This isn’t a new regulation, it’s simply enforcing the old one. I hope a lot of these long speculators fail to find short buyers.
So you think the Hunts trying to corner the silver market and driving the price to $48/oz was a good free market thing?
Well, LESS regulation did such a wonderful job in the mortage market, eh?
Quotes from artcle:
1.
“If the CFTC decides to subject investment banks trading swaps to speculative trading limits—currently 3 million barrels of WTI crude oil for front-month trades—oil prices could deflate significantly, say analysts. “If [the CFTC] forces trade limits on these funds, commodity index traders will have to pull out of this market,” says Stephen Schork, an energy consultant in Villanova, Pa., and editor of The Schork Report, a daily energy newsletter. “The [commodities] bulls would be in for a world of hurt.” Schork says such a correction would send oil prices back to the $80-$100 range.”
2.
“Also testifying before that committee, Greenberger suggested that simple adjustments to commodities regulation could remedy what he views as an artificially accelerated price runup. “If we go back to the way the market was regulated on Dec. 20, 2000, 25% of the [oil] price would disappear,” he says.”
3.
“Greenberger says that given the heated political climate, he fears that misguided propositions that would distort the market—like banning speculators from commodities markets entirely—could win support. “The American consumer is so beaten up, [Congress] may have to resort to more drastic measures or the sky will fall.””
If the current Bush administration is not willing to do 1 and 2....
The _next_ Obama administration will do 3 and worse.
One day last week, gas prices in the New Haven CT area jumped 16-17 cents overnight. All we need is a few more jolts like this nationally, and we’re almost guaranteed to end up with a totally ‘rat controlled government in 2009. What do you think _they’ll_ do about “the markets”?
- John
However, even ICE are the lesser villains here. CFTC (or the Regress...) have simply got to rein in the ''index specs'' and their complete lack of position limits.
“Well, LESS regulation did such a wonderful job in the mortage market, eh?”
What’s wrong with the mortgage market?
Some banks who shouldn’t have lent money to liars may get hosed?
Some idiots and speculators who borrowed too much money may lose their shirt?
Sounds find to me.
The problem is half-ass regulation to try to “fix” what idiots did. They idiots just need to go broke. THAT’s the way a market works.
And in the airline industry...
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