Government uncovers oil price manipulation

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By Benny Nardino | July 28, 2008

Is this really true? This was an interesting read over the weekend from the CNNMoney headliners wherefore the writer based most of her arguments on “Traders manipulated oil prices - U.S.” on an article by Steve Hargreaves on CNNMoney.

Earlier this month Nomi Prins wrote, Oil speculation: Why we don’t have answers on CNN Fortunes. She highlighted, “The problem is that the futures market has gotten so big, and the trading rules in the markets so lax, that it’s not easy to dismiss the speculation theory…” She also cited that,

The infamous December 2000 “Enron loophole” is the topic du jour in Congress. That legislation didn’t just make it easier for savvy traders to buck the system. It exempted entire over-the-counter electronic exchanges (where trading takes place directly between parties, without an intermediary broker) from regulatory oversight by the Commodity Futures Trading Commission.

As a result, capital zoomed to new unregulated exchanges like Atlanta-based ICE, an American firm operating under U.K. regulation, where trading volume tripled from 2005 to 2008, representing 47.8% of global oil futures trading. And participants in the new electronic markets didn’t even have to file “large trade reports” with the CFTC, obscuring trading details across the fastest growing exchanges. That’s scary murkiness….

“In dark markets, more paths of manipulation are available,” says former CFTC trading division head and University of Maryland Law Professor Michael Greenberger. “That may not be happening now, but we just don’t know.”

Do you think these views were fair on the market and the traders? Is this part of the blame game for a problem that is fast becoming bane of every Government? Afterall we are still in capitalists domain. Right? Have your say on this..

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