Nick Snow
Washington Editor
Independent oil and natural gas producers and other commodities market participants have been urging the administration of US President Barack Obama to move carefully in imposing limits on energy market speculation as it implements the Dodd-Frank financial reform act.
With retail gasoline prices moving past $4/gal for regular unleaded, others are calling for more immediate actions.
"It's no secret that speculators are driving oil and [gasoline] prices through the roof," US Sen. Bill Nelson (D-Fla.) said on Apr. 22. "Each passing day, consumers are at the mercy of greedy speculators."
Nelson joined 11 other Senate Democrats and Bernard Sanders (I-Vt.) in urging the US Commodity Futures Trading Commission to quickly raise margin limits for energy-market speculators.
"The margin increase should only apply to speculators, not true hedgers," the senators said in a letter to CFTC Chairman Gary G. Gensler. "This is consistent with current exchange policies that apply different margin requirements for investors and bona fide hedgers," they said.
When US Atty. Gen. Eric H. Holder Jr. announced he had formed an oil and gas fraud taskforce on Apr. 22 in response to President Obama's orders, Holder said the group would evaluate developments in the commodity markets and examine investor practices, supply and demand factors, and the role of speculators and index traders in oil futures markets.
Obama told a Reno, Nev., audience that same day that the group's job would be "to root any case of fraud or manipulation in the oil markets that might affect [gasoline] prices, and that includes the role of traders and speculators."
'Wall Street premium'
CFTC member Bart Chilton said Obama was correct a few days earlier in saying speculators had an impact on fuel prices.
"There is a Wall Street premium on [gasoline] prices today," Chilton said on Apr. 19. "Every time that folks fill up their tanks, they can expect that several dollars are due to speculation."
Chilton said speculative dollars are coming into energy markets "at a blistering pace." Speculative positions in energy contracts have increased 64% since the last time prices spiked in 2008, he indicated.
"Don't get me wrong, we need speculators," Chilton continued, adding, "There is no market without them, but as we have seen, too much speculation can move prices."
Chilton said Obama gave CFTC authority to impose limits on speculators, but the commission has yet to use it. "We need to use the tools that Congress gave us to stop excessive speculation, and we need to do it now," he maintained.
Market participants will continue to seek sensible, deliberate reforms. Achieving that will be hard if gasoline prices keep climbing.
More Oil & Gas Journal Current Issue Articles
More Oil & Gas Journal Archives Issue Articles
View Oil and Gas Articles on PennEnergy.com
