Energy speculation limits considered by U.S. regulator
Last Updated: Tuesday, July 7, 2009 | 2:14 PM ET
CBC News
The U.S. agency that regulates commodities trading is going to hold hearings on whether to limit the number of energy futures contracts, or bets on the future price of products like natural gas, crude oil and gasoline.
"Our first hearing will focus on whether federal speculative limits should be set … to all commodities of finite supply," especially energy products, Gary Gensler, head of the Commodity Futures Trading Commission (CFTC), said Tuesday.
The announcement follows complaints last year that the oil price spike — it hit a peak of $145 US a barrel in July 2008 — was driven by speculative trading. Oil was trading around $63 Tuesday.
The CFTC already sets limits for agricultural products like wheat, corn and soybeans, but does not do so for energy markets. The futures exchanges where the contracts are traded set limits, but are not required to prevent "excessive speculation," the agency said in a news release.
Futures contracts can be a legitimate hedging mechanism, used by producers and consumers to protect against price swings.
But during the summer of 2008, as prices surged, a number of observers and market participants, from billionaire George Soros to the Saudi Arabian government, said the price was driven by speculation.
A U.S. Senate panel has found that speculation has pushed prices up for crude oil, natural gas and wheat futures.
"Excessive speculation is distorting prices, undermining our commodity markets and hurting our economic recovery," Senator Carl Levin, who headed the panel, said in a statement Tuesday.
"If these hearings lead to rigorous, federally imposed position limits across all markets on oil speculators looking for a quick buck at the expense of American consumers, then that will be action I can applaud," Senator Byron Dorgan said.
With files from The Associated PressShare Tools
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