Nbadan
01-17-2010, 06:09 PM
With the price of gas at the pump at its highest point in well over a year, federal regulators moved Thursday to prevent excessive speculation by financial traders from driving the cost of oil even higher. The effort to adopt new limits on the trading of oil and other energy commodities is a sharp reversal after years when regulators left those markets alone.
The proposal from the Commodity Futures Trading Commission, which oversees oil and energy trading, would introduce new restrictions on what the largest traders can do. Concerned that some firms can amass such large holdings in energy commodities that their trades can have an outsize effect on the price of gasoline, heating oil or natural gas, officials said they would prevent traders "from establishing extraordinarily large positions."
The proposed limits highlight a newfound skepticism among regulators toward the financial sector. Big banks and Wall Street firms have transformed the marketplace for energy commodities into a high-stakes casino for speculation, a departure from its original role as a place where airline and shipping agencies, for instance, could buy contracts to keep the price of their fuel steady. Regulators are concerned that this betting has created too much volatility, sending the price of oil and other energy commodities up and down violently.
Oil prices hit a record high of $145 a barrel in 2008 before plunging to $33 a barrel in a matter of months. With the slow economic recovery, they have risen to about $80 a barrel. The instability in prices is caused by several factors, including overall economic conditions, the decisions of oil-rich nations and the weather -- in addition to financial speculation. So it remains difficult to determine how much any regulatory proposal would affect these price swings.
The agency's plan sets the new trading limits high enough that they would affect only 10 firms, agency officials said. They would not name the traders.
Washington Post (http://www.washingtonpost.com/wp-dyn/content/article/2010/01/14/AR2010011404472.html?hpid=topnews)
It's good to see Federal regulators empowered to actually *regulate* stuff eh? Oil prices are down around $5.00 a barrel today from last week. Maybe it's working. It would be great to see these crooks who have been making a fortune by speculating on oil prices get stuck with huge supplies and can't manipulate the prices up, and have to sell for a loss! As others have said though I need to see the real proof before I get my hopes up too high!
The proposal from the Commodity Futures Trading Commission, which oversees oil and energy trading, would introduce new restrictions on what the largest traders can do. Concerned that some firms can amass such large holdings in energy commodities that their trades can have an outsize effect on the price of gasoline, heating oil or natural gas, officials said they would prevent traders "from establishing extraordinarily large positions."
The proposed limits highlight a newfound skepticism among regulators toward the financial sector. Big banks and Wall Street firms have transformed the marketplace for energy commodities into a high-stakes casino for speculation, a departure from its original role as a place where airline and shipping agencies, for instance, could buy contracts to keep the price of their fuel steady. Regulators are concerned that this betting has created too much volatility, sending the price of oil and other energy commodities up and down violently.
Oil prices hit a record high of $145 a barrel in 2008 before plunging to $33 a barrel in a matter of months. With the slow economic recovery, they have risen to about $80 a barrel. The instability in prices is caused by several factors, including overall economic conditions, the decisions of oil-rich nations and the weather -- in addition to financial speculation. So it remains difficult to determine how much any regulatory proposal would affect these price swings.
The agency's plan sets the new trading limits high enough that they would affect only 10 firms, agency officials said. They would not name the traders.
Washington Post (http://www.washingtonpost.com/wp-dyn/content/article/2010/01/14/AR2010011404472.html?hpid=topnews)
It's good to see Federal regulators empowered to actually *regulate* stuff eh? Oil prices are down around $5.00 a barrel today from last week. Maybe it's working. It would be great to see these crooks who have been making a fortune by speculating on oil prices get stuck with huge supplies and can't manipulate the prices up, and have to sell for a loss! As others have said though I need to see the real proof before I get my hopes up too high!