Another day another hearing

Today, in a Senate panel hearing there was consensus among the testimony that specs are driving up commodity prices and oil prices in particular. Michael Greenberger, a professor at the University of Maryland School of Law and a former CFTC official, gave passionate testimony supporting this view. He was "outraged" about the fact that WTI crude contract is traded on US exchange away from CFTC oversight. This could be changed overnight by revoking a no-action letter in which the CFTC declined to regulate trading on West Texas Intermediate oil contract on the London and Dubai exchanges. This simple fast step could take off as much as 25% to 40% from the current oil price over night, in Greenberger's opinion. Some of his constituents giving testimony shared this opinion.

George Soros insisted that his prepared remarks might have been misunderstood in that respect the underlying fundamentals support somewhat current high oil prices. He declined to specify the amount of speculation in oil markets because he is not involved with oil trading. Soros nevertheless thinks that the rise in oil prices and other commodities has "some of the earmarks of a bubble".

Former CFTC official Greenberger advocated strong punishment and severe jail time for the crime of manipulating commodity markets and in doing so criticized the CFTC for doing too little to deter this kind of behavior.

suggested steps to reign in speculators:
close "Enron loopholes" by strict regulation of WTI contracts
more transparency and position limits on non-commercial speculation
increase margin requirements above level of stock margins (>50% from current 2%)

Light Crude July 08


source: Lawmakers look to rein in crude oil speculation
By Chris Baltimore, Reuters
http://www.reuters.com/articlePrint?articleId=USN0341230520080603

read also: Consumers first - oil futures later
Friday, May 16, 2008
http://manonthestreet64.blogspot.com/2008/05/consumers-first-oil-futures-later.html