Tales from the Trail

How high is it? A 2-1/2 year high.

How high can it go? No one knows.

Energy Secretary Steven Chu expressed what is on many minds – that the oil price jump can hurt the economy. “We have a very delicate recovery going on and an increase in prices will make that vulnerable.”

Even with all options on the table, U.S. officials expressed great caution about imposing no-fly zones over Libya. “I think we are a long way from making that decision,” Secretary of State Hillary Clinton said.

Some Republicans saw the oil price scare as an opportunity to push again for expanding off-shore oil drilling. “To end this dangerous over-reliance on oil imports, we must find more domestic resources, improve our efficiency and improve international cooperation,” Senator Dick Lugar said.

We had the chance at the Reuters finance summit to ask CFTC Chairman Gary Gensler what a regulator does when a market takes a sharp turn, like oil has in response to Libya.

He asks the surveillance staff to do a briefing. “And I ask questions about whether there’s any concentration, and whether the surveillance staff is seeing any manipulation or trade practice violations, and get into a dialogue about what the exchanges are seeing.”

While the financial bailouts tossed to automakers, banks and other groups during the recent economic crisis left a funny taste in the mouth of some Americans, one former U.S. regulator hopes efforts to prevent another panic doesn’t go rotten.

The U.S. Commodity Futures Trading Commission is immersed in drafting dozens of rules to assist it in increasing oversight of the once opaque over-the-counter derivatives market, widely blamed for exacerbating the recent financial crisis.

Among the rules it must craft is what the definition of an agricultural commodity is? Of course, corn, cotton, soybeans and livestock, among other items, fall into this realm.

Gary Gensler, chairman of the Commodity Futures Trading Commission, likes to go to the past -- sometimes as far back as 1,000 years -- to explain the financial situations of today.

For example, derivatives existed for 145 years, since the Civil War, and they became regulated in the 1930s, he said at a Reuters Global Financial Regulation Summit in explaining that derivatives need regulation.

If you only want to go back a couple hundred years, Gensler had this to say:  "Somebody in the 19th century invented street lights, somebody invented stop signs, somebody invented traffic lights."