Wall Street resists tougher oil futures legislation as regulators in the US, UK agree to impose limits

US regulators are under pressure from Senate lawmakers to rein in what they see as excessive speculation in commodities markets, which they believe is the culprit behind record prices for crude oil that have risen nearly 40 per cent since January.

For long it has been speculated that the real reason why oil prices are rising is speculation in oil futures, or rights to buy or sell crude oil at a specific price, on a future date, rather than increasing demand from developed nations.

Evidently, American and British regulators do believe such actions have a major hand in driving prices up, and hence, have embarked on joint action to control any such rampant activity. They have just reached a landmark agreement to impose the first trading limits on oil contracts changing hands on a London electronic exchange. The agreement comes as some US lawmakers call for more regulations to rein in speculators.

Of course, the Wall Street institutions don't want the US Congress to kill their proverbial ''golden egg'' by imposing further restrictions on oil trading by way of new legislation. Hence, they have been engaged in intense lobbying in the offices of key legislators and briefing senior officials to put forth their points of view.

Executives from Goldman Sachs and Morgan Stanley, in a pair of lengthy and sometimes testy closed-door sessions in the Senate last week, made the case that their multibillion-dollar investments in energy contracts have not led to higher oil prices. Rather, they told Democratic staff members of the Energy and Natural Resources Committee that the trades allow international markets to operate efficiently and that the run-up in oil prices results not from speculation but from actual imbalances of supply and demand.

However, lawmakers didn't buy into their defence. They warned the executives that no matter what arguments they muster, it would be hard to prevent Congress from acting. Referring to a vote earlier this year to impose new mileage standards on automobile makers, the aide said, "At 90 bucks a barrel, Congress rolled the autos for the first time in 30 years - is it too much to think that Congress will impose more restrictions on you if oil goes to $150 dollars a barrel?"