The South Florida Business Journal reports:
Sen. Bill Nelson, D-Fla., said Friday that oil speculators are using turmoil in Egypt and Libya as the latest excuse for “profit-gouging.”
Nelson has made oil speculation a target in the past. On Friday, he sent a letter his fellow senators, asking them to join him in his latest effort: seeking to raise the margin requirements imposed specifically on purely speculative oil futures contracts.
Nelson wants the senators to co-sign a letter to Gary Gensler, chairman of the Commodity Futures Trading Commission, urging him to act quickly to raise the margin requirements on speculative oil futures contracts.
“The latest spike in oil prices is further evidence that our energy markets are no longer governed by actual supply and demand,” Nelson wrote. “Speculators, again, are seizing on political turmoil to drive the price of oil to unwarranted levels. This time, it’s Egypt and Libya.”
Nelson noted in his letter that speculators have increased their betting on future oil price increases by more than 35 percent, while legitimate hedgers have reduced their holdings of oil futures by more than 20 percent since the Egypt crisis began.
“The loser in this game of profit-gouging by speculators is the American consumer,” he wrote. “Higher gasoline prices mean less money for other things. And at the end of the day, the big loser is America’s economy.”
Last year, in the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress empowered the CFTC to rein in excessive speculation, but rules haven’t been enacted yet. Speculators continue to buy oil with only 6 percent down payments – $6 down on $100 of oil futures. Ordinary investors face 50 percent down payments.
In January, eight U.S. senators called on regulators to reject lobbying by Wall Street and the financial industry aimed at watering down the new rules.
Nelson said in his letter that he would not raise margin requirements on businesses that engage in the hedging of legitimate risk.
http://www.bizjournals.com/southflorida/blog/2011/03/sen-nelson-end-oil-profit-gouging.html
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