US Energy Markets Watchdog Agrees That Speculation Is Contributing To The Record Oil Price
- By Professor Prabhu Guptara
- Published 06/15/2008
Professor Prabhu Guptara
Professor Prabhu Guptara is Executive Director, Organisational Development, Wolfsberg (a subsidiary of UBS - one of the largest banks in the world). He is also Freeman of the City of London and of the Worshipful Company of Information Technologists, and Chartered Fellow of the of the Chartered Institute of Personnel and Development; he is also Fellow: of the Institute of Directors, of the Royal Commonwealth Society, and of the Royal Society for the Encouragement of the Arts Commerce and Manufactures; and he continues to supervise PhD research at the University of Fribourg (Switzerland) as well as to be Visiting Professor at various Universities and Business Schools around the world.
Earlier roles include: a Governor of the Polytechnic of Central London, Member of the Council of the British Institute of Management, of the International Federation of Training & Development Organisations (IFTDO), of the Association for Management Education and Development (UK), of the South East Regional Council of the Confederation of British Industry.
Judge, 1988 National Training Awards, 1980 Commonwealth Poetry Prize, 1990 & 1991 Deo Gloria Prize for Fiction; Chair of the Panel of Judges, Deo Gloria Prize 1992 & 1993.
Experience with an enormous range of organisations including: Akzo Nobel (Netherlands), the Associated Banks Institute (Germany), Barclays Bank (UK), British Petroleum (UK), the Council of Europe, Cultor (Finland), Deutsche Bank (Germany), Groupe Bull (France), Federation of Finnish Engineers (Finland), the International Management Association of Japan, Kemira (Finland), Kraft Jakob Suchard (Switzerland), Leadership Academy (Finland), Nokia Telecommunications (Finland), Novo Nordisk (Denmark), Sedgwick International Insurance and Reinsurance Brokers (UK), Singapore Institute of Management, Sonatrach (Algeria), Sun Alliance (UK), UNCTAD, Valeo (France), and so on.
Organiser, chair and lecturer by invitation for numerous international conferences, he has contributed widely to radio and television in the UK and other countries (The Money Program, Any Questions) and has written for Financial Times (London, UK), The Guardian, The Times and other publications; articles, for example, in The Gower Handbook of Management, The Gower Handbook of Quality, and the International Encyclopedia of Business & Management (Routledge).
A CD-ROM has been issued of his lecture at the Professorenforum, University of Zurich, titled "Making the World Better - Why it does NOT happen...and what TO DO about it"
Further information available from firstname.lastname@example.org
His best-known research publication is "Top Executives in the Global 100 Companies and their IT-Competence" (ADVANCE: Management Training Ltd., UK, and Wolfsberg Executive Development Centre, Switzerland, 1998); and he is included in Debrett's People of Today and in Who's Who in the World. Professor Prabhu Guptara lives in Switzerland.
I am interested to see that the US energy markets watchdog seems to agree with my analysis that speculators are contributing to the record oil price, and wants to introduce limits on traders' positions
Whether they will come up with sensible regulation is a different matter.
In my view, limits on the activity itself is the wrong way to go about what is needed. Activity should be unlimited but subject to certain norms that help the market.
Here are sensible ways to regulate.
Traders should be free to trade, provided they hold all their positions for a certain length of time - the length of time being different for different activities depending on the structure of the industry involved. Trading in the shares of financial services companies could be say half an hour after purchase because financial services companies are involved in a very wide range of activities and so their fortunes might go up and down in that sort of time-frame, but trading in the shares of industries with a rather different structure (aerospace, for instance) should be held for at least one month.
The case of energy companies is similar - if one ignores natural disasters and terrorist possibilites, the supply side takes up to 10 years to influence, while on the demand side the long-term trend is predictable with temporary changes probably depending most on weather fluctuations. Much more precise study will be needed regarded the natural life of each industry so that regulation is appropriate. This is therefore the more long-winded if more precise alternative. The easier but more blanket alternative is the next one.
Traders should be free to trade, provided they hold a certain percentage of each of their purchases (say 50%) long term - by which I mean three years.
No doubt other such mechanisms can be debated so that the most appropriate way of dampening speculation can be found which simultaneously avoids cramping liquidity in global markets.
BTW, the framework for any such regulation needs to be global in geography and comprehensive in terms of the industries involved, otherwise liquidity flows to the regulated industry will be negatively impacted, thereby providing distortedly large liquidity flows to all industries which remain unregulated.