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Lawmakers to DOE: what’s jerking the oil market strings?

By Clarissa Kell-Holland
staff writer

In response to U.S. lawmakers’ call for greater energy market transparency, the U.S. Energy Information Administration has launched a new program, titled the “Energy and Financial Markets Initiative.”

EIA Spokesman Jonathan Cogan said the agency’s new administrator, Richard Newell, is spearheading this initiative aimed at generating a better understanding and analysis of what “drives energy prices” in an effort to bring some “transparency to the market.”

 “We’re hoping that this (initiative) is going to help us to better analyze and forecast prices, to take into account things beyond our traditional physical fundamentals of just supply and demand and include some of the other factors that might be affecting prices as well,” Cogan told Land Line. “We are also going to be looking ahead at the spread in different holders of options contracts on the NYMEX to help predict where prices may shift in the future.”

In short, EIA is trying to get a better grip on energy price movements by studying other influences such as speculation, hedging, investments and exchange rates.

“Hopefully, this will help bring some more transparency to the market, which will hopefully be beneficial for everybody involved, whether it’s consumers or producers or policymakers,” Cogan said. “Our whole feeling is that better information can make better markets and better policies, and this is one way to expand our coverage.”

EIA’s September “Short-Term Energy Outlook” predicts West Texas Intermediate (WTI) crude oil – the major benchmark of crude oil in the Americas – will average about $70 per barrel in the fourth quarter of 2009. That’s an increase of $27 per barrel from its first quarter prediction. The forecast also has diesel averaging $2.47 for the remainder of 2009 and averaging $2.88 per gallon for 2010. LL