Hate derivatives? How can you like cap-and-trade?

Bob Tippee
Editor

Political gyrations over financial and energy reform camouflage a wicked hypocrisy.

Financial reform legislation in the Senate treats derivatives as demonic. Derivatives are tradable financial instruments linked to physical commodities. Some are traded on centralized exchanges subject to regulation, others less formally in a hazy realm known as “over the counter” (OTC).

OTC derivatives receive much of the blame for the financial system’s unraveling in 2008.

Reform legislation would require that many derivatives now traded OTC instead be traded on regulated exchanges.

Attention to derivatives, with the purpose of tightening regulation of them, no doubt is in order. But the pressure on Congress to overreact is strong. Financial industry representatives say the Senate legislation goes too far.

Indeed, senators are just acting in character if they’re using derivatives as a scapegoat. They’d like voters to forget their own roles in the financial crisis, such as encouraging imprudent mortgage lending.

To crack down on existing derivatives while creating another one, moreover, seems wildly inconsisent.

The new derivative would be the tradable emission credit central to cap-and-trade systems for managing greenhouse gases.

Legislation passed by the House made emissions trading its centerpiece. The Senate has been wary of the House approach and may be in no mood to take up climate-change legislation before elections in November.

But Sens. John Kerry (D-Mass.), Lindsey Graham (R-SC), and Joe Lieberman (I-Conn.) have written a bill that retains the cap-and-trade approach at least for utilities.

Prospects for their proposal are cloudy. While many senators don’t want to address the issue now, supporters of aggressive climate-change responses think now may be their best chance to ram a bill into law.

The push lost momentum when Graham threatened to withhold support after Senate Majority Leader Harry Reid, in what many see as an act of political opportunism, made immigration reform his priority.

Political intrigue thus diverts attention from questions about a tradable financial instrument anchored to a license to emit greenhouse gases, the value of which would be determined by the government.

As derivatives go, nothing in existence now is more deserving than that of suspicion.

(Online Apr. 30, 2010; author’s e-mail: bobt@ogjonline.com)

Related Articles

EPA approves Magellan’s Corpus Christi splitter project

12/12/2014 The US Environmental Protection Agency has issued a final greenhouse gas prevention of significant deterioration construction permit to Magellan Pr...

US needs more data before ending crude export ban, House panel told

12/11/2014 Much more environmental impact information is needed before the US can reasonably remove crude oil export limits, a witness told a House Energy and...

BOEM raises offshore oil spill liability limit to $134 million

12/11/2014 The US Bureau of Ocean Energy Management increased the liability limit for oil-spill related damages from offshore operations to $134 million from ...

Rosneft, Essar sign terms of oil supply agreement

12/11/2014 OAO Rosneft and Essar Energy PLC have signed key terms of an oil supply agreement in New Delhi. Rosneft said shipments to India may begin in 2015.

Barton introduces bill to remove US crude export limits

12/11/2014

US Rep. Joe Barton (R-Tex.) introduced legislation that would remove US crude oil export limits that have been in place for nearly 40 years.

North Dakota producers face new vapor pressure standards

12/10/2014 North Dakota has approved new rail transportation safety standards for crude oil that stipulate operating standards for oil-conditioning equipment ...

Chevron, ONGC among companies awarded 15 exploration permits by New Zealand

12/09/2014 New Zealand’s government has awarded six onshore permits across the Taranaki, West Coast, and East Coast basins, and nine offshore permits across t...

Small subset of wells accounts for most methane emissions, researchers say

12/09/2014 A small subset of natural gas wells are responsible for most methane emissions from US natural gas production, said a study from the University of ...

Methane controls just part of complete climate strategy, speakers say

12/08/2014 Reducing oil and gas operations’ methane emissions is an essential, but far from the only, part of a comprehensive climate strategy, speakers at a ...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected