Industry professionals were quick to defend the markets and speculators. Phil Flynn, an energy analyst at PFGBest, called the attack on speculators “the most dangerous economic myth since the idea that everybody should be able to afford a home.”
He consistently has defended speculators, asserting they have an important role to play in the market. “When we talk about speculators, people don’t realize what speculators actually do. They are assuming the risk and creating liquidity,” Flynn says. “And let’s face it, the risk to oil supply has been heighted dramatically over the last few years.”
Others have pointed out that government officials have been quick to blame speculators for higher prices in oil, but failed to recognize their role in other markets. “Natural gas prices are near all-time lows; should we applaud speculators for that?” asks Stanley Haar, principal at Haar Capital Management.
He calls the President’s proposal “totally off-target” and says it actually is worse than doing nothing at all. “This gives the impression of doing something to lower energy prices when in reality it will do nothing,” he says.
Much of the $52 million proposal would go toward bolstering CFTC market surveillance and enforcement. Haar says this would be “throwing more money down the drain.” He has been vocal in his criticism of the CFTC following the Oct. 31 bankruptcy of MF global. “The best part of Obama’s speech to me was when he talked about needing ‘more cops on the beat.’ These people haven’t done their job in the past. They did nothing to stop or solve the MF Global problem,” he says. “It doesn’t have the will to use the money it already has, why give it more? I would ban the whole CFTC and use the money for deficit reduction.”
Ultimately, Flynn called today’s proposal just more political positioning. “President Obama is trying to raise an issue for political purposes on rising gas prices,” he says. “This is just another political red herring. It probably won’t go anywhere; Republicans are not going to go for this.”