17 November 2004 22:20 [Source: ICIS news]
WASHINGTON (CNI)--Chemical manufacturers and other industrial consumers of natural gas called on Congress Wednesday to increase regulatory oversight of natgas trading, charging that “unregulated speculators” are driving up prices.
The Industrial Energy Consumers of America (IECA), an interest group representing chemical, plastics, fertilizer and steel manufacturers along with drug makers, food processors and others, asked key ?xml:namespace>
In a letter to those congressional leaders - who sit on energy, commodity, agriculture and resource committees - the IECA said: “The energy market needs greater oversight so that it operates efficiently and serves the interests of the public rather than unregulated speculators who are becoming an increasingly dominant player.”
The energy interests action group argued that, while well-intended, the Commodity Futures Modernization Act (CFMA) of 2000 did not anticipate consequences of relaxing CFTC oversight of trading.
“For example,” said IECA, “CFMA allowed the New York Mercantile Exchange (Nymex) to become essentially a ‘self-regulated’ entity that can make any change it deems appropriate to the design of its energy futures contracts without CFTC approval.”
Recent Nymex changes in futures contracts, said IECA, have “contributed to significantly increased volatility and speculation and a market that is susceptible to manipulation.”
“The natural gas market price is no longer being set by consumers’ demands for the physical supply of gas,” IECA charged. “Instead of the market serving the greater public good, it serves the investment interests of ever-growing and unregulated billion-dollar hedge funds that are completely disconnected from the consumer and manufacturing markets.”
IECA Executive Director Paul Cicio said that “Hundreds of unregulated hedge funds are now trading energy, and many are of international origin.”
Cicio said IECA is asking, among other remedies, that Congress require Nymex to seek prior CFTC approval of changes to futures contracts terms. CFTC also should be given authority to establish trading limits, “similar to the agriculture commodity markets, which are far less volatile.”
IECA also is urging that CFTC reduce “significantly” the number of futures a single entity may own or control so that “market power cannot reasonably be achieved.” In addition, the group is asking that all hedge funds be registered with the US Securities & Exchange Commission (SEC) and be subjected to the same financial auditing requirements that govern other funds.
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