July 27, 2009
The U.S. Commodity Futures trading Commission under the chairmanship of Gary Gensler appointed by President Obama is holding hearings exploring greater regulation of the energy markets and the speculative trading that surrounds them. Oil prices spiked to 147 $ last year driven upwards by the actions of hedge funds, banks and financial speculators rather than basic supply and demand conditions. The hearings underway in Washington and statements made by the chair of the Commission make it clear that there will be greater regulation on position limits by non commercial traders in the near future. This regulatory reform is long overdue and is welcome news.
Just yesterday on Bloomberg business news the managing director of Oppenheimer oil and gas called for regulation with teeth and blamed speculation by hedge funds, pension funds and other financial actors for the run up in oil prices beyond where they should be given basic supply and demand. If this is implemented we should see a drop in oil prices in the current circumstances since according to Fadel Gheit of Oppenheimer the world is currently awash in plentiful supplies of oil. We shall see how this plays out as the slow recovery proceeds.
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