Organization Says Excessive Speculation Distorts Oil Markets, Kills Jobs

The Air Transport Association (ATA) last week submitted public comments to the Commodity Futures Trading Commission (CFTC) in support of the proposed rule on speculative position limits for certain energy contracts. The CFTC rule proposes to establish speculative position limits and increase market transparency and reporting requirements. These measures will provide regulatory support for a return of supply-and-demand fundamentals in the marketplace. The ATA contends that these reforms will help address the high fuel prices and volatility seen by consumers in recent years. The three-month public comment for this rule (75 FR 4144) expires on April 26, 2010.

A strong CFTC rule in combination with congressional passage of the Wall Street Transparency and Accountability Act of 2010, will close loopholes, increase transparency and limit speculative trading in the commodity futures markets.

In its comments, the ATA said that:

• The proposed speculative position limits should be strengthened
• Excessive speculation distorts oil markets, causing higher prices and increased volatility.
• Excessive speculation has contributed to lost jobs, reduced service and industry losses.
• Evidence demonstrates that speculative trading, volatility and high prices are linked.
• Index funds and other passive investors should be subject to position limits.
• Exemptions should be limited and apply narrowly to true end users.

"Oil speculators exploit gaps in the regulatory structure to drive up oil prices out of sheer greed," said ATA President and CEO James C. May (above). "The proposed CFTC rule, particularly if strengthened, would limit excessive speculation and the ability of investment banks and large financial interests to dominate oil markets at the expense of consumers."

FMI: www.airlines.org