US, trade officials call for more natgas controls

09 July 2007 23:40  [Source: ICIS news]

WASHINGTON (ICIS news)--US commodity regulators and trading exchange executives told a Senate panel on Monday that more federal control of natural gas trading is needed.

 

Walter Lukken, acting chairman of the Commodity Futures Trading Commission (CFTC) told the Senate subcommittee on investigations that the commission needs more staff, funding and authority to successfully monitor natural gas trading.

 

The availability and pricing of natural gas is crucial to US chemicals manufacturers because they are almost wholly dependent on gas as a feedstock.  Some chemical producers have argued that the three-fold increase in US natgas prices over the last five years is due chiefly to speculative trading rather than normal supply-demand factors.

 

Testifying in the second day of the subcommittee’s examination of what it termed excessive speculation in US natural gas trading, Lukken said his regulatory agency is at an historic low level of staffing with only 436 analysts, investigators and enforcement officers.

 

“The CFTC needs additional staff resources in almost every area,” Lukken said, noting that staff levels have declined even while the futures trading industry has seen unprecedented growth.

 

He said the commission “is nearing the outer limits of its authority” and needs additional tools to ensure fair competition and the integrity of gas trading.

 

James Newsome, chief executive of the New York Mercantile Exchange (NYMEX), said the current statutory structure for the commission no longer works.  “Legislative change may be necessary to address the real public interest concerns created by the current structure of the natural gas market,” Newsome said.

 

In particular, Newsome called for extension of the commission’s trading authority to include the Intercontinental Exchange (ICE), saying that ICE “should be subject to the full regulation of the CFTC”.

 

ICE chairman Jeffrey Sprecher agreed that the commission’s funding and staffing should be significantly expanded and that federal trading regulators should be able to integrate data from ICE and NYMEX. 

 

Sprecher cautioned, however, that Congress should be careful in drafting new trading laws.

 

The subcommittee issued a report two weeks ago that concluded that “current restraints on speculative trading to prevent market manipulation and price distortions are inadequate.”

By: Joe Kamalick
+1 713 525 2653

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly