Comment Text:
I urge the commission to swiftly enact the proposed limits on speculative positions in oil, gasoline, and other commodity markets.
Bona fide hedgers, such as airlines and manufacturing companies, find themselves shouldering more risk than ever. Ironically, the same tool that was created to help them manage that risk, the commodity exchange, has become a more of a burden than a boon. Over the last 20 years, speculative investors with no interest in buying or selling physical commodities have flooded into commodities markets, and now perform a huge majority of transactions at the NYMEX and other exchanges. During that time, commodity prices have been on a steady upward march. Huge price increases have occurred in times of low demand and high supply, contrary to free market economic principles.
Opponents of position limits argue that limits would place excessive restrictions on free market activity, but this argument rings hollow as it has become clear in recent years that the sheer volume of dollars and contracts controlled by institutional speculators has effectively overpowered supply and demand as the determinant of prices. Although the link between vastly increased speculation on commodities like oil and rising prices has not been proven conclusively, the direct correlation between speculative activity and prices of widely traded commodities like crude oil is impossible to ignore. Meanwhile, Americans from lower socioeconomic classes struggle to keep their small businesses afloat and scrape together pennies to pay their fuel bills to heat their homes or fill the gas tank in their car.
Commodities have proven to be an immensely successful investment for hedge funds, investment banks, and other institutions with millions or billions of dollars to gamble with. On the other hand, America’s small businesses and households find it more and more difficult to plan budgets and meet financial obligations due to the wildly unpredictable and excessively high prices for the commodities they depend on for their livelihood and survival.
Opponents also argue that limiting speculative activity in commodity markets would lead to a flight of investment capital from US shores to more loosely monitored exchanges overseas. They argue that such a flight could harm the US economy. I firmly believe that the economic damage of inadequately regulated speculation is ongoing: every extra dollar spent by an American consumer on an essential product like propane, or gasoline is a dollar not spent on purchasing other goods and stimulating our economy. Every extra dollar spent on wholesale heating oil by a heating oil dealer is a dollar that is not used to grow his business and create jobs.
Position limits on commodity speculators are needed now more than ever. The CFTC must place the well being of small businesses and individual Americans over growing the profits massively wealthy institutional speculators. The CFTC must enact the proposed position limits as soon as law and the parameters of good governance allow.
The CFTC should also look at restricting the trade of commodities to producers and physical users of commodities.
