The price of oil continues to break records. But, who is to blame? Many believe that excessive speculation is the driving force behind the high price of oil. In fact, some say that close to 60% of today's oil price is pure speculation.

Stop Excessive Speculation Act: S. 3268

On Wednesday July 16, 2008 another bill directed at reducing excessive speculation was introduced. This new proposal is the product of collaboration between Democratic Senators Harry Reid of Nevada, Charles Schumer of New York, Byron Dorgan of North Dakota and Patty Murray of Washington State. The Stop Excessive Energy Speculation Act of 2008 (S. 3268) would, as proposed, address issues that many consider necessary to combat speculation. It would require the CFTC to categorize only those investors who buy or produce petroleum to be considered legitimate hedgers (in contrast with those seeking only financial gain) and would require the CFTC to enforce position limits. A key objective within this legislation is to help the CFTC obtain information on trades, as much of the problem with policing markets is a lack of 'transparency.' Ideally, market regulators will be able to better run the market place by having timely, accurate data. To this end, S. 3268 will close the 'London Loophole,' a technicality which has allowed traders to conduct business outside the reach of the CFTC (MarketWatch, Laura Mandaro). Debates are expected to begin the week of the 21st. NEFI members should expect to hear more about this as developments occur.