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Why Obama's Crackdown on Oil Speculators Won't Work

Why Obama's Crackdown on Oil Speculators Won't Work
Photograph by Ramin Talaie/Bloomberg

Those pesky oil speculators. If only we could rein them in by making it more expensive to bet on oil prices. If only regulators had the firepower to track down market manipulators and impose tougher penalties on those they caught. The price of oil would surely drop, right? If only it were that easy. One thing about the oil market: It is not prone to simple solutions.

On Tuesday, President Obama announced he wants Congress to increase the amount of collateral that traders have to post to buy a futures contract. (It’s typically around 10 percent of the value of the total contract.) Obama also wants to give the CFTC an extra $52 million to pay closer attention to the oil market and dole out stiffer penalties to those who manipulate it: $10 million instead of the current $1 million. That assumes of course that the CFTC can find those manipulators.