NEW YORK - Federal regulators are planning their first major step to rein in oil speculators. Whether it’s enough to control future spikes in energy prices remains to be seen.
The Commodity Futures Trading Commission today will consider setting trade limits on the New York Mercantile Exchange to keep fund managers and other “speculative’’ investors from wielding too much influence in the market.
Speculators - investors who make money by trading oil contracts - have flooded the Nymex in recent years. They mostly bet that oil will get more expensive, leading many to believe their presence in the market jacks up prices. The limits proposed by the CFTC would cap how many contracts traders could buy. Violators likely would be told to get rid of especially large positions. The CFTC also has the power to issue fines and revoke trading privileges.
Speculators got most of the blame when crude soared above $147 a barrel in 2008. But economists who studied commission data point out that exchange-traded funds and other investors have historically moved in the opposite direction of the market, selling when prices rise and buying contracts when prices fall.
CFTC approval of trade limits today will be only a preliminary move. The commission will ask for public comment on the proposal before a final vote.