High Heating Oil Bills? New Oil Trading Rules Could Help
Federal agency readies to take on oil speculators.
Nov. 2, 2009 — -- As the crisp autumn air in New England gets chillier, Ken Williams braces for his busiest time of year. His Quincy, Mass.-based company, Scott Williams Inc., sells heating oil to homeowners.
In recent years, unprecedented swings in the price of oil have left Williams feeling frustrated. His customers are frustrated too, since the costs get passed along to them. The typical Boston-area household heating bill, around $750 a decade ago, is now typically $1,500 a year, Williams says.
He says he partly blames commodities futures traders, speculating for paper gains, for the volatility and steeper operating costs that his business faces.
"I really think we need to keep Wall Street players out of commodities," Williams said. "Or at least mitigate their influence."
But help may be coming.
The Commodities Futures Trading Commission will soon announce an official proposal to curb speculation through new rules called Position Limits, caps on how big a bet any given Wall Street player can make in the energy futures markets. The proposal could come in the next few weeks, several senior industry members told ABC News.
If such new rules are eventually adopted, they could either keep energy prices in check, or unintentionally drive them up, depending on whose opinion you ask. That includes both prices at the pump and prices for home heating oil.
"Limits are coming," said Phil Flynn, a widely followed energy analyst at PFG Best Research in Chicago. "The only question is how stringent they are going to be."
No formal announcement has been made yet, a CFTC spokesman said. However, CFTC Chairman Gary Gensler, speaking at a trade association luncheon in Washington, D.C., on Tuesday, made his view clear: "I believe that we should consider setting position limits to guard against excessive concentration in the energy futures markets," Gensler told a gathering of the Natural Gas Roundtable.
Gensler also has indicated publicly that if the CFTC were to propose a new rule on position limits, it would do so this fall.
