U.S. Considers Curbs on Speculative Trading of Oil

[groovedaddy]

WASHINGTON — Reacting to the violent swings in oil prices in recent months, federal regulators announced on Tuesday that they were considering new restrictions on “speculative” traders in markets for oil, natural gas and other energy products.

The move is a big departure from the hands-off approach to market regulation of the last two decades. It also highlights a broader shift toward tougher government oversight under President Obama.

Since Mr. Obama took office, the Justice Department has stepped up antitrust enforcement activities, abandoning many legal doctrines adopted by the Bush administration.

The Obama administration is also proposing an overhaul of financial regulation that would include tougher capital requirements for big banks, tighter regulation of hedge funds and a new consumer protection agency with broad power to regulate credit cards, mortgages and other consumer lending.

In the case of oil and gas trading, regulators made it clear that they were willing to move, without waiting for Congress to act on Mr. Obama’s overhaul, invoking their existing powers.

http://www.nytimes.com/2009/07/08/business/08cftc.html?_r=1&th&emc=th

[Cant trust em]

1. Looks like a good step so far.

We'll see how this shakes out.

[depakid]

2. If people were serious, they'd add a tax to transactions

wouldn't have to be much- and it wouldn't hurt legitimate hedgers.

[Cant trust em]

3. oh good. I knew there was some reason that this must be a front. nt

[depakid]

6. Not kidding- and it makes sense

“A transaction tax on crude oil securities will close the gap in funding a twenty-first century transportation system while lowering the price of oil. This is a win/win.”

http://www.defazio.house.gov/index.php?option=content&task=view&id=490

[Lasher]

4. Closing the Enron Loophole

Good. Now how about ammending the Commodity Futures Modernization Act of 2000 to require regulation of derivative trading?

[liberal N proud]

5. Speculative trading in general needs to be controlled

But Oil trading would be a good start and maybe we could get some stabilization in gas prices.

[Democrats_win]

7. In Greed we Trust. It will never end.

[GliderGuider]

8. There is a good article and commentary about this on The Oil Drum

CFTC - Futures Position Limits on Energy?

Let's return to a central theme: that finite resources are being quantified by infinite money. Today the CFTC made some announcements regarding transparency in futures positions; also Congressional hearings began with intent to limit futures positions sizes , especially for energy speculators. Unfortunately, this 'speculation' issue is one of many red herrings that ignores the widening fundamental disconnect between financial and real assets.





Historical real value of US dollar (American Institute for Economic Research)

Speculators are generally ignored as cleaner fish, unless stock markets go lower or crude oil prices higher, at which time the media and talking heads converge to locate the bad guys. When either of the two unassailable american entitlements: rising stocks and cheap oil, are not on trend, the witch-hunt-cum-rationalization begins. As we are mired in a deepening recession, the roots of which lie in the generation long replacement of tangible things with paper and digits, the logical human reaction to oil moving back from $40 to $70 is to blame someone, in order that it retreat some and not act as economic headwind. (The same thinking mans logic used to request temporary withdrawals from the national emergency Strategic Petroleum Reserve to reduce oil from $70.) The blame it seems, will again fall on speculators, (note: technically the majority of participants in our economic system should now be defined as speculators -we are buying/spending natural resources on margin with a downpayment of belief).

We have a monumental problem - a system whose claims on the future are higher than its real assets. Reducing positions sizes in energy futures is a step in the right direction to equilibriate paper markers with real wealth. But it will have immediate negative repurcussions (reducing liquidity, reducing confidence in system, increasing volatility etc.), which is why it ultimately won't happen. We will continue to borrow from all aspects of our socio-ecological system to keep the current paradigm intact (growth at all costs, marginal unit pricing, infinite substitutes, market will solve it, etc). Sooner, rather than later, a plan for re-linking scarce resources to what and how we execute social transactions is going to occur. Like M. King Hubbert, I am in favor of an energy based currency and no futures trading at all other than for producers and those taking delivery. But these ideas are so many steps beyond 'regulating oil futures in order to keep prices low' I expect I am wasting my breath.

There's more at the link, including some very good comments.