New Trading Regulations Could Bring Heating Oil Price Relief Soon
(image: wikimedia.org)
There has been a lot of talk this year about the CFTC curbing speculation in the oil markets through increased regulations. With thousands of speculators trading paper instead of oil, prices have swung out of control, wreaking havoc on both small business; and consumers’ bottom lines.
But as ABC News reported on Monday, help may be on the way. The Commodities Futures Trading Commission (CFTC) is set to announce a new set of rules called Position Limits, which are “caps on how big a bet any given Wall Street player can make in the energy futures markets.” The move is an attempt to curb the excessive speculation many feel are to blame for recent volatility in the oil markets.
While many in the financial industry are unhappy with the coming announcement, the news appears to be good for oil-dependent industries and consumers who rely on heating oil to keep warm. The price of crude oil in the past few years has been subject to wild swings, and many attribute the irregularities to speculation which seems to have become the rule, rather than the exception.
The airline industry in particular is held hostage by the erratic pricing structure. David Castelveter, spokesman for the Air Transport Association, a trade group for U.S. airlines, has said that the volatility prevents airlines from being able to make even simple business decisions. “Every dollar increase in the price of oil adds about $430 million to airlines’ annual operating costs,” Castelveter told ABC News.
For heating oil and other energy consumers, the CFTC regulations will likely have a positive effect, lowering prices and introducing more stability into the oil markets. Ken Williams, owner of the Quincy, Massachusetts-based Scott Williams Inc. oil company, looks forward to the possible new rules and thinks their effect on the oil markets couldn’t make the situation any worse than it already is.
“Stock market speculation at least enriches everybody,” Williams adds. “Commodity bull markets enrich a few and pick the pockets of the rest of us.”
Commodities and Derivatives Regulation Explained: What it Means for Heating Oil Users | HeatingOil.com says: says:
[...] explained, a linchpin of the CFTC’s proposals for preventing excessive speculation is to impose positions limits, or caps on how much of a commodity a buyer or investor could have under contract. Positions limits [...]