Curbing Commodities Speculation

Many funds will purchase oil contracts in excess of available supply, with the aim of holding these contracts for the long term. This type of buying is done for many reasons. There is widespread fear about the future of the greenback, given the record deficit and continued printing of money.

"Inflation" is a word that'll make the hair on the back of your neck stand up, and buying hard assets such as oil and gold is a way to hedge against future inflationary pressures.

Finally, many thought we may be nearing the end of the recession and may in fact start seeing improvement in the near future. If this proves to be the case, many are speculating that demand for oil and gasoline will increase.

This buying and speculation by large funds in energy contracts is clearly under the microscope. Sen. Bernie Sanders, an independent from Vermont, and Rep. Bart Stupak (D., Mich.) are just two of many leaders who believe this type of speculation was responsible for last year's historic rise in crude.

The impact has clearly been felt by households already feeling the pinch from job losses and a sagging economy, and it's something that must be avoided in the future.

It's important to keep the CFTC's actions in perspective. Any action taken is not going to affect the vast majority of market participants. One may still "speculate" on prices rising and falling. Trading firms and funds may do so as well. The idea here is to simply avoid another "bubble" that will hurt us all in the end. This will be a process, and I do believe it will be one that benefits all of us.

Being involved in the futures business, I am in favor of speculation. The speculator is a big piece of efficient markets. I am not, however, for the American consumer being choked at the gas pump. Times are hard enough as it is.