'A valuable tool for managing risk and keeping well site operations engaged and intact'

Independent Petroleum Association of America President Barry Russell on July 9, two days after CFTC Chairman Gary G. Gensler announced that the commission would consider position limits on energy commodities for speculators:

“Although attacking so-called speculation is a popular program for some who may not fully understand its full market function for America’s small and independent natural gas and oil producers, it’s an incredibly valuable tool for managing risk and keeping operations engaged and intact at the well site. If the CFTC, and Congress, obstruct common-sense market activity, independent energy producers will not be able to hedge their production.

“Without hedging, companies will be unable to protect their cash flow to maintain exploration and production budgets and retain employees when prices drop. Loss of hedging reduces the certainty of capital and makes new investment less certain. Lower investment means less production. And, as we know, with less production comes higher prices.

“As unemployment continues to climb its way toward 10%, and with energy prices still unstable, Washington should be working to enable and encourage more American energy production, not less of it. Energy production creates good jobs, helps steady prices, and makes our nation more secure. As IPAA has said before, actions by the CFTC could have a devastating impact on the American energy industry.”

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