- The Washington Times - Wednesday, July 8, 2009

Federal regulators will examine whether the government should impose limits on the number of futures contracts in oil and other energy commodities held by speculative traders, the head of the Commodity Futures Trading Commission said Tuesday.

The agency will hold a public hearing later this month to gather views from consumers, businesses and market participants on the idea of new limits for energy futures contracts, CFTC Chairman Gary Gensler said. It will be the first in a series of hearings in July and August on various topics to determine how the commodities agency “should use all of its existing authorities to accomplish its mission,” he said.

The move comes against a backdrop of concern in Congress and complaints by traders over speculation in the oil futures market.

By law, the CFTC sets limits on the amount of futures contracts in agricultural products such as wheat, corn and soybeans that can be held by each market participant to protect the market against manipulation. But for energy commodities — crude oil, heating oil, natural gas, gasoline and other energy products — it is the futures exchanges themselves that set the position limits.

“This different regulatory approach to position limits for agriculture and other physically delivered commodities deserves thoughtful review,” Mr. Gensler said. “It is incumbent upon the CFTC to ensure a fair and transparent price discovery process for all commodities.”

Sen. Carl Levin, Michigan Democrat, welcomed the potential action. Examinations by a Senate investigative panel he heads have found upward pressure on prices for crude oil, natural gas and wheat futures caused by market speculation.

“It is a relief to know that the Obama administration does not plan to stand by silently while inflated crude oil prices top $70 per barrel despite ample oil supplies and low demand,” Mr. Levin said. “Excessive speculation is distorting prices, undermining our commodity markets and hurting our economic recovery.”

Crude oil prices hit an eight-month high last week above $73 a barrel, and some analysts expect prices to surge again soon amid signs that the worst of the economic slowdown is over. On Tuesday, benchmark crude for August delivery shed more than $1 to dip below $63 a barrel.

Sen. Byron L. Dorgan, North Dakota Democrat, one of six senators who voted against Mr. Gensler’s confirmation in May, called the agency’s move “a positive first step.”

Opponents of Mr. Gensler, who was a Treasury Department official during the Clinton administration, had expressed concern about what they said was his past deregulatory stance and his actions in an area blamed for aggravating the financial crisis.

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