Regulation Of Energy Future Trading
As we went to press, federal regulators were considering new restrictions on speculative trading in futures markets for oil, natural gas and other energy products. In addition, an article in the Wall Street Journal reported that the Commodity Futures Trading Commission plans to issue a report suggesting that speculators played a significant role in the run-up in oil prices in 2008. Petroleum prices are determined by trading on energy futures markets such as the New York Mercantile Exchange and the Intercontinental Exchange. Contracts represent hypothetical delivery of the underlying energy commodity at a future date. However, approximately 99% of these contracts are cancelled without ever taking delivery. In a recent segment on “60 Minutes,” CBS News reported that the gallons traded on these energy futures exchanges are 17 times the amount of gallons that are actually used. CNBC “Mad Money” host Jim Cramer called energy futures trading a “farce” and a “joke.” Hopefully, Congress and/or federal regulators will decide to place position limits on speculation in energy futures markets. We believe that limits will eliminate a great deal of the volatility that has plagued energy markets and driven up energy prices. This change in regulatory thinking regarding energy futures is an important development for energy consumers and for the economic well-being of the country. www.hartandiliff.com
