June 14, 2008
Saturday

WASHINGTON, D.C. ­ In the wake of growing concerns regarding the impact of speculation on oil price, U.S. Senators Ted Stevens (R-Alaska) and Dianne Feinstein (D-Calif.) introduced legislation requiring the Commodity Futures Trading Commission (CFTC) to impose the same rules on institutional investors that other investors must follow. This legislation would essentially level the playing field in energy futures markets.

At present, CFTC exempts institutional investors from those limits when they execute their trades through swaps dealers. By using third parties, institutional investors can currently ignore restrictions on how much of their investment is in oil.

"Unsustainable fuel prices are crippling the economy and runaway speculation has a hand in bringing the cost of a barrel of oil towards $150. This bill will provide needed regulation of oil futures trading which Senator Feinstein and I feel has artificially driven up the prices," said Senator Stevens. "This bipartisan approach, teamed with domestic energy innovation, is urgently needed to face America's energy crisis."

"It is becoming clear that rampant speculation in energy markets by institutional investors may be driving up the price of oil and gas. And yet, CFTC exempts these investors from the position limits that are imposed on all other speculators. This gives institutional investors an unfair advantage in the marketplace ­ and is contributing to the skyrocketing energy prices," Senator Feinstein said. "It's time to level the playing field, and require position limits for all speculators. There's no doubt that our energy markets are in crisis ­ and this is one important step we need to take to get us back on track."

Last month, CFTC announced that it will review the trading practices for investors to ensure that this type of trading activity is not adversely impacting energy prices. The agency also announced plans to determine whether different practices should be employed.

The legislation introduced by Senators Feinstein and Stevens would outline specific speculation rules which large institutional investors must follow, ensuring that they are not able to drive up energy prices.

Background:

Recent testimony before numerous Congressional Committees indicates that between 2000 and 2002, major institutional investors, like mutual funds, began to view commodity futures markets as a new "asset class," suitable to be used in large financial portfolios. From 2003 to 2008, investments in commodity index funds rose from $13 billion to $260 billion. As Daniel Yergin, one of the nation's leading energy market experts put it: "Oil has become the 'new gold' - a financial asset in which investors seek refuge as inflation rises and the dollar weakens."

Source of News:

Office of Sen. Ted Stevens (R-AK)
www.stevens.senate.gov

Office of Dianne Feinstein (D-Calif.)
www.feinstein.senate.gov

 

SitNews ©2007
Stories In The News
Ketchikan, Alaska