U.S. Considers Curbs on Speculative Trading of Oil
U.S. Considers Curbs on Speculative Trading of Oil
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.
The Commodity Futures Trading Commission said it would consider imposing volume limits on trading of energy futures by purely financial investors and that it already has adopted tougher information requirements aimed at identifying the role of hedge funds and traders who swap contracts outside of regulated exchanges like the New York Mercantile Exchange.
“My firm belief is that we must aggressively use all existing authorities to ensure market integrity,” said Gary Gensler, chairman of the commission, in a statement. He said regulators would also examine whether to impose federal “speculative limits” on futures contracts for energy products.
Much of Mr. Gensler’s announcement was focused on precise issues well within his agency’s authority, suggesting that he was serious about seeking changes. But his proposals could encounter fierce opposition from big banks and Wall Street firms, which are each big traders in the commodity markets and manage big investment funds focused on commodities. Oil prices hit a record high of $145 a barrel last summer, then plunged to $33 a barrel last December and have since bounced back to more than $60.
Much of the wild swings over the last year were caused by chaos in the global financial system, as banks and much of Wall Street came perilously close to collapse last September and the global economy fell into the most severe recession in decades.
But a growing number of critics have blamed those who are betting on the direction of energy prices for some of the extreme volatility……
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http://www.nytimes.com/2009/07/08/business/08cftc.html?_r=1&8au&emc=au