Comment Text:
I represent a small, 4th generation home heating fuel business in Central Maine that employs about 45 people. I would like to sincerely urge the CFTC to support immediate adoption of the proposed rule on speculative position limits for commodities (RIN 3038–AD15 and 3038–AD16 Position Limits for Derivatives).
Significant trading in the oil markets by speculators that have no intention of taking delivery of the oil are adversely affecting the markets with undue and impractical volatility. According to the Petroleum Marketers Association of America (PMAA), the world’s oil supply is traded 8 times over every day. I would liken that to buying a loaf of bread that had passed through the supply chain (from the baker to the regional distributor to the retailer) 8 times, with each player’s cut compounding with every pass. While perhaps not an exactly parallel comparison, if it is completely illogical with bread, why not with oil?
The past year’s run up in oil & gas prices completely defies the supply & demand fundamentals that the markets are supposed to be based on. Inventories are strong and production continues to outpace demand, yet prices continue to soar. I’ve not seen numerous articles and commentaries in the past few weeks where so-called expert economists claim that today’s oil prices have, nor will have a negative effect on the economy. How can that be possible? I assure you that my customers would disagree. While on the surface, higher fuel prices and the resulting shift of money from the consumer to big oil may appear to be a net economic change of zero; don’t you really have to look deeper than that? I have to believe that each dollar that the consumer saves on oil or gas would make a greater contribution to the U.S. economy than that same dollar would in the hands of “big oil”.
Many studies by experts of varying disciplines have warned of the harmful affects of excessive speculation. In Title VII of the Wall Street Reform Act of 2010, Congress acknowledged the potential harm of excessive speculation by requiring that the Commission impose speculation limits on currently unregulated markets. I believe the Commission understands its responsibility under existing law to prevent excessive speculation as an undue and unnecessary burden on interstate commerce. I urge that the commission strengthen the proposed rule and in light of the growing commodities bubbles that threaten our economic recovery and security, I urge its immediate passage and enforcement.
Commodities such as energy and food are vital resources to American industries, businesses and consumers first and foremost. Speculators have a role in providing liquidity to the market and helping energy and agriculture companies and consumers manage price risk. But when they dominate these markets (as they do now) they have the opposite effect. These markets exist to serve bona fide commercial hedgers as a tool for risk management and as a price discovery that is reflective of real-world supply and demand fundamentals, but deregulation and massive positions held by speculators have distorted these markets. The position limits rule, therefore, will play a crucial role in reestablishing the true purpose of and help return stability and confidence to these markets. Again, I urge the immediate adoption of this rule.
I thank you for your consideration,
Sincerely,
Jonathan Murray
Murray Oil Company
Turner, Maine
