There has been a lot of debate of whether the high price of crude oil, currently hovering around $126 per gallon, is merely due to supply and demand or whether it is to some degree driven by speculation.
The U.S. Commodity Futures Trading Commission (CFTC) has announced a number of initiatives that seek to make the energy futures markets more transparent, increasing the amount of information received from energy traders.
“All Americans are significantly affected by high energy prices—whether it’s paying more at the pump, or higher costs for farmers and entrepreneurs,” said CFTC Acting Chairman Walt Lukken and Commissioners Michael Dunn, Jill Sommers and Bart Chilton. “Today, the Commission is taking important steps to ensure that the U.S. energy futures markets function properly and operate free from manipulation and abuse. With these initiatives, we are improving our oversight capabilities and bringing greater sunshine to these markets.”
According to the Commission, the nationwide crude oil investigation began in December 2007, and while the specifics will remain confidential, the investigation itself was publicly disclosed due to the unprecedented market conditions.
“In addition to the CFTC’s ongoing examination of the role of fundamental economic forces and new investors in the recent commodity market price increases, the agency continues to pursue one of its primary missions – to deter, detect, and punish futures market manipulation,” the Commission said.
“CFTC seems to be getting a little more serious about regulation,” Denton Cinquegrana, markets editor for the Oil Price Information Service (OPIS), told FleetOwner. “They’re being pressured by Congress to do something. The government wants to investigate whether speculation is to blame, although they’ve done that in the past and always came back to find nothing.”
To regulate overseas trading, the Commission announced it has reached an agreement with the United Kingdom Financial Services Authority (FSA) and ICE Futures Europe for expanded international energy commodity surveillance and information sharing.
Under the agreement, CFTC will be provided with daily large-trader positions in the UK WTI crude oil contracts and received a near-term commitment to gain enhanced trader information for more detailed identification of market end users.
Domestically, the Commission promised proper transparency of trading in U.S. energy markets, requiring traders to provide the agency with monthly reports of their index trading. It also will routinely require more detailed information from index dealers and swaps dealers in the futures, and further examine trading practices to make sure they are not adversely impacting the price discovery process, the commission said.
The American Trucking Assns. (ATA) applauded the move, saying that “balancing the need for an efficient petroleum market with the desire to limit petroleum speculation could help burst the bubble that has formed in the petroleum markets.”
OPIS’s Cinquegrana said that the action may scare speculators, but it’s hard to tell how successful it will be. “What they may do is require more information from trades to be submitted to CFTC,” he said. “Instead of submitting a, b and c they would be required to submit a, b, c, d and e.”“Time will tell if anything will come out of it. It’s really hard to prove that one group or entity is driving up prices,” Cinquegrana added.