CFTC Leak Spurs Speculation of Oil Speculation
by Paul Springer
As consumers and regulators continue to sputter about speculation driving up oil costs, the leakage of Commodity Futures Trading Commission data sheds new light on the trading behind the ugly $5-per-gallon prices in 2008.
Someone who remains nameless provided confidential CFTC position reports to U.S. Sen. Bernie Sanders, who leaked the data to The Wall Street Journal:
The data that was leaked to the Wall Street Journal was compiled by the CFTC in 2008 during a “special call” in which the agency sought crude oil position data from swap dealers so they could piece together market activity occurring both on and off the exchange, people familiar with the matter said.
One thing that quickly emerges is that prices did not go up because everyone jumped on the bull wagon. Plenty of traders were short.
However, many were trading past exchange limits by making off-exchange transactions. Trading on multiple exchanges isn’t illegal, but trading all over the place makes it difficult to assess an individual traders’ risk and assemble a net composite for how much is being traded.
The chart shows positions for energy traders, but a diverse array of firms were trading back when gas prices shot up last time. The chart shows D.E. Shaw, Bridgewater Associates and Stichting Pensioenfonds ABP with the biggest positions in crude oil.
The biggest off-exchange positions were held in Singapore’s sovereign wealth fund and Stichting and Caisse de Depot et Placement pensions.
Schroders, D.E. Shaw and Bridgewater were active in a variety commodities, on and off exchange.
The senator believes the data indicate that speculators influence pricing too much. “This report clearly shows that in the summer of 2008… speculators dominated the crude oil futures market causing tremendous damage to the entire economy,” Sanders told The Wall Street Journal.
Not surprisingly, the futures industry lobby is not pleased with the leak, according to Reuters:
“This type of incident will have a chilling effect on derivatives trading in the U.S. because market participants will be reluctant to take the risk that their positions will be exposed to the public-and their competitors,” John Damgard, president of the Futures Industry Association, said in a statement sent to Reuters.
The Calgary Herald is among those that expects the data to turn up the volume on controvery about ongoing regulatory changes:
The leak of the data — which had been given to regulators confidentially in order to protect the firms’ positions — has sparked concern at the CFTC and outrage among some in the industry at a time when increasing government oversight is already threatening to curb some trading.
No one really wants more government, but there’s something about rising prices at the pump that puts Americans in a hostile mood – not that it’s ever done any good.
The Federal Trade Commission is currently investigating gas prices, and it remains to be seen how that turns out. It’s not the first time the commission has looked into the matter. A 2005 investigation found that the rise in high-volume gas station and market combinations actually reduced prices.
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