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Washington - The White House unveiled a proposal on Tuesday to crack down on speculation in oil markets, which has been blamed by some politicians for the rising price of crude and fuel.
The plan calls for a tenfold increase in the maximum civil and criminal penalties that can be applied for the manipulation of oil futures markets, the White House said.
The Obama administration is also calling for Congress to provide more funding to the Commodity Futures Trading Commission (CFTC) to increase surveillance and enforcement staff for oil futures market trading.
The proposal also calls on the CFTC to be given the power to raise margin requirements in oil futures markets.
The rising cost of oil and fuel in the world's top consumer has become a central focus of the US presidential election this year.
Mixed reaction
The move received mixed reaction from analysts.
Michale Wittner, global head of oil research at Societe General, said the proposal was unlikely to pass before November.
"Obviously we're in an election year so it's very political, but the only scenario I can see it possibly passing under before then is if there's a huge spike as a result of a major supply disruption from Iran.
"That's the only way I see it getting enough bipartisan support. Otherwise I'd expect there to be some push-back from the Republicans. The other point is the CFTC already works very closely with the exchanges, and I'd imagine they would continue to do so if they were given powers over oil margin requirements.
"They're still going to rely on the exchanges expertise."
Carl Larry, president of Oil Outlooks, said there was little manipulation in the oil markets and "this is an easy way for him (Obama) to break it to the American people that oil is cheap in America.
“We have some of the cheapest oil prices in the world. They can't change margins too much because that undermines free market principles," he said.
Jay Levine, broker at Enerjay, said: “Any 'outside' intervention (by the government) usually doesn't last or alter the picture that was in place before any threat of intervention.
"The market's going to do what they were doing or going to do before. With that said, the intervention throws a monkey wrench in the short-term picture and typically only adds to market direction uncertainty," he said.
“Raising margins is the easiest way the exchange (vis-à-vis the government) makes it harder for the small speculator to trade, thus removing the small speculator, not really the larger ones.
"Liquidity might become a greater issue with fewer small players in the market. Reduced liquidity often means greater volatility, the exact opposite of its purpose," said Levine.
The plan calls for a tenfold increase in the maximum civil and criminal penalties that can be applied for the manipulation of oil futures markets, the White House said.
The Obama administration is also calling for Congress to provide more funding to the Commodity Futures Trading Commission (CFTC) to increase surveillance and enforcement staff for oil futures market trading.
The proposal also calls on the CFTC to be given the power to raise margin requirements in oil futures markets.
The rising cost of oil and fuel in the world's top consumer has become a central focus of the US presidential election this year.
Mixed reaction
The move received mixed reaction from analysts.
Michale Wittner, global head of oil research at Societe General, said the proposal was unlikely to pass before November.
"Obviously we're in an election year so it's very political, but the only scenario I can see it possibly passing under before then is if there's a huge spike as a result of a major supply disruption from Iran.
"That's the only way I see it getting enough bipartisan support. Otherwise I'd expect there to be some push-back from the Republicans. The other point is the CFTC already works very closely with the exchanges, and I'd imagine they would continue to do so if they were given powers over oil margin requirements.
"They're still going to rely on the exchanges expertise."
Carl Larry, president of Oil Outlooks, said there was little manipulation in the oil markets and "this is an easy way for him (Obama) to break it to the American people that oil is cheap in America.
“We have some of the cheapest oil prices in the world. They can't change margins too much because that undermines free market principles," he said.
Jay Levine, broker at Enerjay, said: “Any 'outside' intervention (by the government) usually doesn't last or alter the picture that was in place before any threat of intervention.
"The market's going to do what they were doing or going to do before. With that said, the intervention throws a monkey wrench in the short-term picture and typically only adds to market direction uncertainty," he said.
“Raising margins is the easiest way the exchange (vis-à-vis the government) makes it harder for the small speculator to trade, thus removing the small speculator, not really the larger ones.
"Liquidity might become a greater issue with fewer small players in the market. Reduced liquidity often means greater volatility, the exact opposite of its purpose," said Levine.
