Chlebina Capital Management
Prohibitions On Market Manipulation and False Information in Subtitle B of the Energy Independence and Security Act of 2007
It is obvious that speculation/manipulation is the reason for the spike in oil as supply and demand dynamics do not change enough in one day to justify the volatility that we've been witness to. The FTC is going to have to do the CFTC's job because they have proven that they are unwilling. The CFTC has classified the investment banks as "Commercial Participants", which has enabled them to manipulate the market without any regulation. The CFTC has also allowed the ICE and the DME to trade US commodities without any US regulation. The CFTC relies on the home countries of the ICE and DME to do the regulation. It's my belief that the CFTC has taken actions to purposely allow the manipulation of the futures market. The loopholes that have been allowed to remain open such as the "Enron Loophole" or "London-Dubai Loophole" need to be closed. The impact of this manipulation is impossible to measure. The increased price at the pump is just one impact. The increase in the cost of food is a product of both higher gas prices and higher feed costs. These inflated prices are reflected everywhere including inflation which will impact economic decisions. The FTC should read the senate testimony of Michael Master on May 20, 2008 and Michael Greenberger on June 3, 2008 because they did an excellent job of describing the issue. The FTC states that "The Commission hopes to conclude the rulemaking process by the end of the year" which I fear is too late. I hope that the FTC will follow the suggestions made by Michael Greenberger in his testimony in order to speed up the process. I urge you to close the loopholes, reclassify investment banks as non-commercial participants, and increase margin requirements in the futures market.