(Adds comment)
April 17 (Reuters) - The White House unveiled a slate of
legislative proposals on Tuesday aimed at cracking down on oil
market manipulation, as the administration attempts to combat
high gasoline prices.
The plan calls for a tenfold increase in the maximum civil
and criminal penalties that can be applied for the manipulation
of oil futures markets, the White House said.
The Obama administration is also calling for Congress to
provide more funding to the Commodity Futures Trading Commission
to increase surveillance and enforcement staff for oil futures
market trading. The proposal also calls on the CFTC to be given
the power to raise margin requirements in oil futures markets.
For more details on plan:
The rising cost of oil and fuel in the world's top consumer
has become a central focus of the U.S. presidential election
this year.
The following are comments from oil analysts, politicians
and traders on the Obama proposal.
AMY JAFFE, ENERGY POLICY EXPERT AT RICE UNIVERSITY'S BAKER
INSTITUTE IN HOUSTON:
On expanding access to CFTC data: "People like me cannot
analyze whether people are manipulating the market or not
because they keep the data secret. Their whole rationale for
keeping the data secret was that people need their commercial
advantage -- but people who trade know what everyone's positions
are. It's the public who doesn't know.
"Given the financial climate experience we had in 2007 and
2008, wouldn't you want to know whether your bank is really long
in the futures market or not?
"It's important in managing a financial crisis to know who
is in the market or who isn't if suddenly there is a crisis in
oil that is going to take down the banks."
On giving the CFTC power to change margin requirements: "The
thing about margin requirements is that when markets are very
volatile and they afraid about banks buying too much oil on
leverage, it gives them a tool.
"With margin calls, you have to have the political will to
use it. Once they give them that power, would a politician
actually have the guts to use it? If you use it when we are
already in a horrible crisis, it is too late."
MICHAEL WITTNER, GLOBAL HEAD OF OIL RESEARCH AT SOCIETE
GENERALE:
"I think this is unlikely to pass before November. Obviously
we're in an election year so it's very political, but the only
scenario I can see it possibly passing under before then is if
there's a huge spike as a result of a major supply disruption
from Iran. That's the only way I see it getting enough
bi-partisan support. Otherwise I'd expect there to be some
push-back from the Republicans.
"The other point is the CFTC already works very closely with
the exchanges, and I'd imagine they would continue to do so if
they were given powers over oil margin requirements. They're
still going to rely on the exchanges expertise."
CARL LARRY, PRESIDENT, OIL OUTLOOKS LLC, NEW YORK:
"There is little market manipulation in the oil markets and
this is an easy way for him (Obama) to break it to the American
people that oil is cheap in America.
"We have some of the cheapest oil prices in the world. They
can't change margins too much because that undermines free
market principles.
"If they raise margins on (speculators) and not on
commercials, liquidity dries up and prices go higher. If they
raise hedging margins, then capital that would be used to
produce cheaper oil will go to maintain margins and oil goes
up."
JAY LEVINE, BROKER, ENERJAY, LLC, PORTLAND, MAINE:
"Any 'outside' intervention (by the government) usually
doesn't last or alter the picture that was in place before any
threat of intervention. The market's going to do what they were
doing or going to do before. With that said, the intervention
throws a monkey wrench in the short-term picture and typically
only adds to market direction uncertainty.
"Raising margins is the easiest way the exchange (vis-à-vis
the government) makes it harder for the small speculator to
trade, thus removing the small speculator, not really the larger
ones. Liquidity might become a greater issue with fewer small
players in the market. Reduced liquidity often means greater
volatility, the exact opposite of its purpose."
JOHN KILDUFF, PARTNER AT AGAIN CAPITAL LLC, NEW YORK:
"The call for much higher margin requirements has been a
rallying cry for the those who prefer to blame the price
discovery mechanism for the underlying conditions that produce
the prices being paid.
"Oil supplies are routinely under threat from governments
that control the spigot and disaffected populations that want a
bigger piece of the rock. Demand has gone nowhere but up.
"Having said that, we look forward to seeing the natural gas
market speculators feted at the White House soon for their work
in reducing prices upward of 90 percent in several short years.
"Regarding manipulation, it is serious and damages the
reputation of the markets. The penalties should be severe."
(Reporting by Eileen Houlihan, Janet McGurty, David Sheppard,
Robert Gibbons in New York; editing by Jim Marshall and
Marguerita Choy)
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