WEST PALM BEACH, FL (HEDGECO.NET) – US House Democrat John Dingell of Michigan is calling for an investigation of the role of hedge funds in the gas market. Congressman Dingell is a ranking member ofthe House Committee on Energy and Commerce. Dingell is calling on the Federal Energy Regulatory Commission and the Commodity Futures Trading Commission to investigate and issue a report on thematter. Mr. Dingell said he is making the request based on a complaint made by Stephen Etsler, the head of Stand Energy Corp., an energy company based out of Ohio. In a letter to the agencies,Dingell said, “Mr. Etsler complains that many hedge funds are trading speculatively, never intending to take delivery of the gas, this has allegedly produced wild swings in the price of gas to thedetriment of traditional gas users.”
The Congressman also wants the New York Mercantile Exchange to join in the investigation; he wants the report issued by Jan, 3, 2005. There is tremendous interest by hedge funds on the energy sector, the energy market remains an area of high volatility which offer hedge funds trading opportunities that have basically dried up in many other markets.
Many hedge fund companies traded the crude oil market during the recent crude oil price fluctuations arising from disruptions in crude oil production and supply from some of the global trouble spots. According to a report by Peter Fusaro, Chairman, Global Change Associates Inc,� Energy trading is no longer the domain of just any energy company; energy trading has entered the world of big-time, big-stakes trading.”
In the report called �Hedge Funds Entering the Energy Trading Space,� Fusaro showed �that there are more than 200 hedge funds focused on energy trading. This includes pure energy commodity trading on NYMEX or over-the-counter markets, commodity/ energy equity plays, distressed asset plays, and various other financial plays.� However, hedge funds are merely taking advantage of market inefficiencies by entering the energy trading arena such trading activities are legal.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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