GO
Loading...

Cramer: Oil Futures Market Is a ‘Farce’

Tuesday, 7 Jul 2009 | 8:47 PM ET
Cramer's Outrage
Mad Money host Jim Cramer shares his outrage of the day.

Without further regulation, Cramer told viewers on Tuesday, manipulation of the energy futures market is virtually inevitable. Right now traders can use near-unlimited credit to swing prices in either direction, and that’s causing false valuations of oil and natural gas.

“The oil futures market? It’s a total farce,” Cramer said, adding that he was “stunned and outraged” by the speculation and Washington’s seeming inability so far to curb it.

The Mad Money host named margin requirements as the big issue. Right now energy traders need to put only 10% down on a position big enough to move markets. Just last week a rogue London trader pushed Brent crude higher with a mere $10 million. As a result, Cramer said, people wondered if gas prices would cross $3, airlines were given pause, and the idea of a consumer-led recovery came into question. Those requirements need to be increased, he continued, if the manipulation is to end.

Cramer also pushed back against anyone who says the energy markets are too “deep” to be manipulated. See: rogue London trader example above. And one has to wonder why no major oil companies admit to selling oil in these markets. It could be that they are “just too darned dysfunctional,” he said. More than that, though, Cramer said that people denying the effects of speculation have a “vested financial interest in maintaining the status quo,” or they are academics with no real-world trading experience.

“They’re just too big, and they’re more powerful than the government,” Cramer said, “and they have never yet been defeated.”

Worst of all? In the end, it’s the consumers who get hit the hardest. It was for them that the Mad Money host said he was speaking out.


Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

Contact Mad Money

  • Showtimes

    Monday - Friday 6p ET
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.