Bloomberg reacts to Obama regarding commodity futures trading
U.S. President Barrack Obama recently proposed changes within the Commodity Futures Trading Commission (CFTC), which he hopes would have favorable effect on gas and crude oil prices and, for oil consumers as well. The proposal is focused on increasing the number of CFTC personnel tasked with overseeing oil markets, allocating more funds for IT to enhance trade monitoring, imposition of stronger sanctions for manipulators, setting a “bet ceiling” for investors, and more trading transparency on the part of the Commission.
Observers say that it would be difficult to get Congress’ nod to the proposals. Moreover, their impact on crude oil prices in the short-term is quite minimal.
Apparently, the proposal targets not only potential manipulators but speculators as well, and while these measures are supposed to help lower gas prices in the long-term, the role of speculators in stimulating market activity and investments should not be understated. Researchers say that speculators aid in tempering market volatility by predicting price trends.
On the other hand, price manipulation in futures trading has been going on for ages, and it is only fitting for the administration to put a leash on these offenders.
Still, consumers should not pin their hopes too high on pump prices going down in the near term, even if these measures are approved and implemented.
Nonetheless, there is truth to the administration’s claims that Republicans could be living in a fictional energy realm. Republicans believe that a more open policy on oil investment in federal waters, specifically oil exploration and drilling projects, could reduce gas prices below $3 per gallon levels. To this, Obama’s camp countered that groups who continue to push the issue could be living in an era when pump prices plunged to $1.63 dollars per gallon – the year 2008, when the U.S. economy had crumbled.
In fact, Obama does not have a hold over short-term market prices for crude, as it being driven by factors already beyond him and his administration.
As head of the nation and given the above scenario, his programs, including energy preservation, development of alternative energy sources, and exploration of domestic fossil fuels are, so far, the best energy-related initiatives that he has undertaken towards tempering the country’s dependence on oil.